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' 

LIBRARY 

OF    THE 

UNIVERSITY  OF  CALIFORNIA. 

Accession .tJ..UU.Ü.D. •    ^^^'T^'^ 

^ 

p 


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i    VT 


V 

r 


ECONOMIC   STUDIES 

OF 

THE    UNIVERSITY    OF    CHICAGO 


NUMBER    III. 


NOW  READY 

No.  I. 

THE    SCIENCE    OF    FINANCE 

EyGj 

riAV  COHN. 

h.  Veblen 

Translated  from  the  German  by 
8vo.  pp.  12  +  800  ;  price  $3.50 

Dr.  T. 

No.  II. 

HISTORY  OF  THE   UNION   PACIFIC  RAILWAY 

By 

Henry  Kirke  White 

IN  PREPARATION 

No.  IV. 

HISTORY 

OF    THE    LATIN    UNION 

By 

Henry  Parker  Willis 

THE 

INDIAN   SILVER  CURRENCY 

AN  HISTORICAL  AND   ECONOMIC  STUDY 


BY 

KARL    ELLSTAETTER 


TRANSLATED    BY 

J.  LAURENCE    LAUGHLIN 

HEAD    PROFESSOR    OF    POLITICAL    ECONOMY    IN    THE    UNIVERSITY 
OF    CHICAGO 


CHICAGO 

Cf)e  ^anibersitg  of  («Tttrago  Vrrss 
1895 


Copyrighted  by 

THE   UNIVERSITY  OF  CHICAGO 

1895 


GENERAL 


Chf    janitocrsitn    of    Ct)icaDO     ^Drr»» 


PREFACE. 

In  the  discussion  about  standards,  to  no  country  is  more 
attention  drawn  than  to  India;  and  rightly,  since  the  fate  of 
silver  is  to  be  decided,  above  all,  in  India.  But,  on  this  point, 
there  exists  in  the  Indian  question  considerable  confusion, — 
as  in  so  many  parts  of  the  currency  question.  Many 
try  to  veil  their  lack  of  clearness  under  dogmatism ;  and 
talk  about  axioms  and  elementary  propositions  of  economics, 
which  need  no  proof. 

I  have  tried  to  base  my  conclusions  principally  upon  the 
official  documents  which  have  been  published  at  the  initiative 
of  both  the  English  and  Indian  authorities,  without  a  priori 
conceptions  and  in  the  interest  of  no  economic  or  political 
party  whatever, —  for  which  one  is  unfortunately  always  obliged 
to  give  assurance  in  the  discussion  of  the  currency. 

It  is  not  consonant  with  the  spirit  of  a  scientific  work  to  intro- 
duce into  the  field  of  investigation  matters  which  cannot  yet  be 
grasped  in  their  entirety,  and  upon  which  those  closest  at  hand 
cannot  yet  form  any  judgment.  The  role  of  prophet  is  a  thank- 
less one  in  economics ;  he  who  wishes  to  give  himself  up  to 
picturing  the  future  stands  quite  outside  of  science.  For  this 
reason,  I  determine  to  investigate  in  this  work  the  events  only  up 
to  that  point  of  time  —  to  June  26,  1893  —  when  the  Indian 
Government  closed  its  mints  to  the  free  coinage  of  silver. 
Should  this  investigation  contribute  somewhat  to  a  clearer 
understanding  of  Indian  affairs,  I  shall  have  accomplished  my 
purpose. 


96008 


In  conclusion,  permit  me  to  express  my  most  profound 
thanks  to  Herr  Geh.  Hofrat  Prof.  Dr.  Brentano  and  to  Herr 
Prof.  Dr.  Lotz,  the  directors  of  the  economic  seminar  in  the 
University  of  Munich.  Especially  to  Herr  Prof.  Dr.  Lotz  do  I 
owe  the  greatest  thanks ;  he  introduced  me  to  the  study  of 
money,  inspired  my  work,  and  during  its  jjrogress  supported  me 
with  advice  and  necessary  scientific  materials  in  the  kindest  way. 

Karl  Ellstaetter. 

Munich,  February  24,  1894. 


CONTENTS. 


CHAPTER  I. 

THE     INDIAN     MONETARY     SYSTEM. —  MOVEMENT    OF    THE     PRECIOUS     METALS. —  THE 
USE    OF   THE    PRECIOUS    METALS. 

§      I.  The  Monetary  System I 

§    II.   Imports  of  I'recious  Metals 5 

§111.  The  Use  of  the  Precious  Metals  in  India    -------       8 


CHAPTER  II. 


THE    INFLUENCE    OF   CHANGES    IN    THE     PRICE    OF     SILVER    ON    TRADE,    AND    ON    THE 
INDUSTRIAL    AND    AGRICULTURAL    PRODUCTION    OF    INDIA. 

§    I.  Fluctuations  of  the  Exchanges -         -         -         -  2i 

§  II.  Effects  of  the  Fall  in  the  Value  of  Silver 

A.  Effect  on  Prices 25 

B.  Exportation  of  Wheat  from  India 38 

C.  The  Cotton  Industry      ----------  44 

D.  Movement  of  Trade  in  General           -------  55 


CHAPTER  HI. 


THE    FINANCIAL    CONDITION    OF    THE    EAST    INDIAN    GOVERNMENT. —  COMPLAINTS  OF 
ITS   OFFICIALS. 

§    I.  The  Condition  of  the  Government 58 

A.  Means  of  Obtaining  Gold       -         -         -         -         ^         -         -         -         -  60 

B.  Expenditures  of  the  Government 

(a)  Those  to  be  Paid  in  Gold -         -         -  63 

(b)  Those  to  be  Paid  in  Silver    --------  65 

C.  The   Income          -.-.------.  67 

D.  Criticism  -         - 73 

§11.  The  Complaints  of  Officials 75 


via  CONTENTS. 

CHAPTER  IV. 

HISTORY    OF    THE    INDIAN    SILVER    CURRENCY. 

§    I.  The  Earlier  Times  to  1835 81 

A.  The  Silver  Money 81 

B.  Gold 

(a)  The  Mohur 83 

(b)  The  Pagoda         -         - 84 

§11.  Attempts  at  Reform  since  1835 -  -         ■     8s 

APPENDIX  I. 

Statement  of  Sir  David  M.  Barbour  concerning  the  Introduction  of  the  Limping 

Gold  Standard  into  India,  June  21,  1892 107 

APPENDIX  II. 

Tables  of  Exports  and  Imports  of  Merchandise  and  Precious  Metals. —  Coinage. 
—  Receipts  from  Sale  of  Bills  and  Cable  Transfers  on  Indian  Govern- 
ment.—  Paper  Money  Circulation  -         -         -         -         -         -         -         -        115 

APPENDIX  III. 
Graphic  Representation  of  the  Exports  of  Wheat  and  the  Rates  of  Exchange   -       117 


LITERATURE. 


[except  titles  mentioned  in  the  text.] 


A.     OFFICIAL  DOCUMENTS. 

Reports  of  the  Royal  Commission  Appointed  to  Inquire  into  the  Recent  Changes  in 

the   Relative  Values  of  the  Precious  Metals  (Gold  and  Silver  Commission), 

With  Minutes  of  Evidence  and  Appendices.     4  vols.;  London,  1886-88. 
Report  of  the  Committee  Appointed  tu   Incjuire    into  the   Indian   Currency.     London, 

1893. 
Minutes  of  Evidence  taken  before  the  Commission  Appointed  to  Inquire  into  the 

Indian  Currency  together  with  an  Analysis  of  the  Evidence  and  Appendices. 

London,  1893. 
Papers  Relating  to  a  Gold  Currency  for  India.     London,  1865. 
Reports  of  the  Royal  Commission  Appointed  to  Inquire  into  the  Depression  of  Trade 

and  Industry  with  Minutes  of  Evidence   and   Appendices.     5  Vols.;  London, 

1886. 
Financial  Statement  of  East  India.     London,  1893. 
General  Report  of  the  Census  of  India,  1891.     London,  1893. 
Statement  of  the  Trade  of  British  India  with  British  Possessions  and  Foreign  Countries 

for  the  Five  Years,  1885-86  to  1889-90.     London,  1891. 
Statement  Exhibiting  the  Moral  and  Material  Progress  and  Condition  of  India  During 

the  Year  1889-90.     London,  1891. 
Statistical  Abstract   Relating  to   British    India    from    1S82-83   to    1891-92.     London, 

1893. 
Statistical  Abstract  for  the  United  Kingdom.     Various  years. 


B.     OTHER  LITERATURE. 

W.  W.  Hunter:    The  Indian  Empire.     London,  1882. 

Ottomar  Haupt:    L'Histoire  mondtaire  de  notre  temps.     Berlin  and  Paris,  1886. 

W.  Lexis :  Article,  "  Silber  und  Silberwährung,"  in  the  Handwörterbuch  der  Staats- 
wissenschaften.    Bd.  V. 

The  same:  "Der  gegenwärtige  Stand  der  Währungsfrage,"  in  the  Jahrbucher  für 
Nationalökonomie  und  Statistik,  3.  Folge  ;  Bd.  VI.,  p.  11. 

R.  Chalmers  :    History  of  Currency  in  the  British  Colonies.     London,  1893. 


X  LITERATURE. 

J.  Wolf:  Thatsachen  und  Aussichten  der  Ostindischen  Konkurrenz  im  Weizenhandel. 
Tübingen,  i886. 

A.  J.  Macdonald :  "  Banking  in  India,"  in  the  Journal  of  the  Institute  of  Bankers, 
1890,  p.  277. 

E.  Nasse:  "Das  Sinken  der  Warenpreise  während  der  letzen  15  Jahre,"  in  the  Jahr- 
bücher für  Nationalökonomie  und  Statistik,  Neue  Folge  ;  Bd.  XVII,  pp.  50 
and  129. 

G.  Ruhland :  "  Aus  dem  Verfassungs-  und  Verwaltungsrecht  des  britisch-indischen 
Kaiserreichs,"  in  the  Zeitschrift  für  die  gesammte  Staatswissenschaft,  49  Jahr- 
gang (1893),  pp.  223  and  408. 

J.  Laurence  Laughlin :  "Indian  Monetary  History,"  in  the  Journal  of  Political  Econ- 
omy, Chicago,  September,  1893,  p.  593- 

Guilford  L.  Molesworth  :  "  Indian  Currency,"  in  the  Annals  of  the  American  Academy 
of  Political  and  Social  Science,  Philadelphia,  January,  1894,  p.  i. 

Deutsches  Handelsarchiv,  published  by  the  Imperial  Department -of  the  Interior. 
Various  years. 

The  London  Economist.     Various  years. 

Journal  of  the  Institute  of  Bankers.     Various  years. 


CHAPTER  I. 

THE  INDIAN  MONETARY  SYSTEM.  ~  MOVEMENT  OF  THE 
PRECIOUS  METALS.  — USES  OF  THE  PRECIOUS  METALS 
IN   THE   COUNTRY. 

§    I.       THE    MONETARY    SYSTEM. 

The  circulating  medium  of  British  India  separates  itself  into 
three  parts.  The  chief  portion  is  made  up  ( i )  of  the  money  coined 
by  the  royal  Indian  Government.  Of  far  less  importance  than 
these  are  (2)  the  currency  notes  ;  and  of  still  less  importance  is 
(3)  the  coin  circulation  of  the  Native  States. 

Let  us  first  give  attention  to  the  coin  circulation  of  the  Native 
States.  Quite  a  large  number  of  Native  States  in  all  parts  of 
India  exercise  the  right  of  coinage,  a  privilege  upon  which  they 
jealously  insist,  because  it  is  regarded  as  a  mark  of  sovereignty.* 
In  each  the  standards  are  very  different.  The  chief  silver  coin 
is  the  rupee  with,  however,  many  varieties  in  the  different  states. 
In  1835,  when  the  present  standard  was  introduced,  there  was  a 
list  of  not  less  than  300  different  kinds  of  rupees  then  existing 
(many  of  these  doubtless  out  of  use)  all  more  or  less  varying 
from  each  other.  The  attempt  made  by  Act  IX  of  1876  to  bring 
about  the  acceptance  of  a  common  standard  of  money  through 
the  whole  of  India  failed.  For  the  Native  States  that  obliged 
themselves  not  to  coin  for  30  years  at  least,  and  not  to  allow 
any  coins  like  the  Anglo-Indian  to  be  struck  under  their  author- 
ity, the  act  ordains  that  the  royal  Indian  Government  should 
strike  coins  which  should  be  uniform  in  weight  and  fineness  with 
those  of  British-India,  and  should  have  a  device  different  from 
those  formerly  used  by  the  respective  states.  Such  coins  should 
then  be  the  legal  means  of  payment  in  all  India. 

'  Report  of  Indian  Currency  Committee,  §  \2\  et  seq. 

I 


2  INDIAN    SILVKK    CURRENCY. 

Up  to  this  time  only  four  small  states  have  accepted  the  pro- 
visions of  this  law,  so  that  the  much  desired  uniformity  has  not 
been  gained.  The  information  as  to  the  coinage  of  the  different 
Native  States  is  not  sufficient  to  enable  us  to  state  the  amount 
of  it.  There  is,  however,  ground  for  the  opinion  that  it  is  not 
very  considerable. 

Hyderabad,  the  largest  Native  State,  coined  in  1887-8  816 
gold  tolas,  and  15,051  silver  tolas;  in  1888-9  7^4  gold  tolas, 
and  1,776,421  silver  tolas;  a  tola  being  equal  in  weight  to  a 
rupee.  The  value  of  the  rupee  of  Hyderabad,  known  as  the 
Halli  Sicca  rupee,  is  about  14  [)er  centum  less  than  the  rupee 
of  British-India.  The  state  of  Baroda  coined  in  1883-4  800, 000 
rupees;  and  in  1884-5  900,000  rupees.  In  the  three  following 
years,  however,  none  were  coined  ;  in  1891  the  mint  was  provided 
with  new  machinery.  The  mint  of  Cashimir  does  not  appear  to 
be  any  longer  active.  Mysore  and  Rewah  are  said  to  have  no 
mint ;  the  coinage  of  Holkar  in  Indore,  of  Bhopal,  and  of  Tra- 
vancore  are  said  to  be  unimportant. 

These  coins  also  circulate  in  the  British  provinces,  especially 
in  those  lying  on  the  borders  of  the  respective  Native  States ; 
thus  the  coins  of  Galkwar  from  Baroda  and  of  Nizam  from  Hy- 
derabad—  both  the  best-known  "native"  rupees  —  are  received 
without  objection  far  within  the  British  limits.  Their  deficiencies 
in  value  arc  known  and  a  corresponding  discount  made.' 

A  far  more  important  role  than  that  of  the  coins  of  the 
Native  States  —  in  the  failure  of  a  gold  medium  for  the  indis- 
pensable wholesale  exchanges  —  is  played  by  the  paper  means 
of  payment.  Previous  to  1862  the  notes  of  the  Presidency- 
Banks  circulated,  as  well  as  the  Promissory  and  Treasury  notes 
issued  bv  the  Government.^ 

The  "promissory  notes"  were  drafts  on  the  Treasury  for  the 
payment  of  interest  on  the  j)ublic  debt;  the  "treasury  notes" 
were  a  kind  of  treasury-bills  and  bore  interest,  which  varied  very 
materially    from    time    to   time.     The   notes    of  the   Prcsidency- 

^  Minutes  of  Indian  Cttrrency  Committee,  Question  2679. 
*  Journal  of  the  Institute  of  Bankers,  1 890,  p.  292. 


MONETARY    SYSTEM.  3 

Banks  were  received  as  metallic  money.  For  their  security  an 
amount  of  Government  "treasury  notes"  equal  to  one-fourth 
of  the  quantity  of  the  Bank  notes  in  circulation  must  be  depos- 
ited. The  right  to  issue  notes  by  the  Presidency  Banks,  which 
had  been  transferred  by  Acts  VI  of  1839,  III  of  1840,  and  IX  of 
1843  to  the  banks  of  Bengal,  Bombay,  and  Madras  —  was,  accord- 
ing to  the  rccjuirements  of  Act  XIX  of  1861,  to  cease  from 
March  ist,  1862.  This  act  (of  1861)  further  provided  that  a 
special  "Department  of  Issue"  should  have  entire  charge  of  the 
issue  of  paper ;  and  required  also  that  all  the  precious  metals, 
coined  or  in  bars,  which  the  department  receives  for  the  issue  of 
currency  notes,  should  be  held  as  a  reserve,  with  the  proviso  that 
40,000,000  rupees  —  or  another  sum  to  be  determined  by  the 
Governor-General  —  might  be  invested  in  State-paper;  and  that 
the  aforesaid  reserve,  metallic  as  well  as  State-paper,  should  be 
kept  apart  always  ready  for  the  redemption  of  the  currency 
notes.  By  the  Act  III  of  1871  this  law  was  amended,  and  it  was 
provided  that  henceforth  60,000,000  Rs.  of  the  reserve  could  be 
invested  in  Government  paper.  Act  XV  of  1890  raised  the 
amount  to  80,000,000  Rs.  The  circulation  of  currcncv  notes 
amounted'  on  the  31st  of  March  : 

Rx. 

1871     .....  10,437,291 

1876 10,999,927 

1880 12,357,727 

1884 12,756,541 

1885 14,576,904 

1886 14,173,272 

1887 13,876,836 

1888  ------  16,424,379 

1889 15,737,813 

J890 15,771,780 

1891 25,690,449 

1892  -..-..  24,076,408 

1893 26,401,820 

'Appendix  to  the  Minnies  of  the  Indian  Currency  Committee,  p.  260.  The 
amounts  in  Indian  Currency  are  expressed  in  the  following  pages  partly  in  rupees 
(abbreviated  to  Ks.)  and  partly  —  after  the  manner  of  the  Indian  statistics  —  in  an  ideal 
unit  of  10  rupees,  the  English  pound  of  reckoning  (abbreviated  to  Rx). 


4  INDIAN    SILVER    CURRENCY. 

The  extraordinary  rise  in  1891  was  the  consequence  of  an 
exceptionally  great  speculative  shipment  of  silver  to  India  in 
that  year.' 

The  banks  at  that  time  preferred  to  exchange  the  silver 
which  had  collected  in  their  hands  for  Treasury  notes.  They 
sent  the  silver  to  the  Currency  Department  and  there  exchanged 
it  for  notes,  so  that  the  paper  circulation  increased  to  an  exces- 
sive amount.  The  statement  of  the  banks  ^  at  the  end  of  1890 
shows  an  enormous  increase  in  the  supply  of  Government  Treas- 
ury notes. 

By  far  the  most  important  role,  moreover,  in  the  circulation  of 
the  country  is  naturally  played  by  the  species  of  money  coined  by 
the  British-Indian  Government  in  the  mints  of  Bombay  and  Cal- 
cutta. As  a  unit,  Act  XVII  of  1835  introduced  the  silver 
"Company's  rupee"  of  180  grains  Troy  weight,  \^  fine,  and 
therefore  containing  165  grains  (10,692  g.)  fine  silver.  All 
silver  brought  to  the  mint  up  to  June  26,  1893,  was  coined  at 
seigniorage  charge  of  2.25  per  centum.  The  subsidiary  coinage 
was  regulated  by  the  Indian  Coinage  Act  (Act  XXIII)  of  1870. 
A  gold  coin  was  also  struck,  the  gold  mohur,  but  only  to  an 
inconsiderable  extent.      Since  1835  there  was  coined: 

Silver' 
1835-6— 1884-5  - 
1885-6— 189I-2        - 

Gold 

1835-6— 1884-5      - 
1885-6— 189I-2 

2,445.444 

The  gold  mohurs  were  receivable  from  1841-1852  only  in  the 
treasuries,  and  are  today  only  bought  and  sold. 

^  Minutes  of  the  Indian  Currency  Committee,  Questions  111-112,  266-270,  275- 
278,  323-325- 

'See  the  Appendix  to  the  Minutes  of  Indian  Currency  Cominittce,  p.  255  et  sec/. 

'For  the  figures  to  1884-5,  compare  the  Third  Report  of  the  Commission  on 
Depression  of  Trade,  p.  385  et  seq.  from  1885-6  on,  the  official  figures  given  in  the 
appendix  to  the  Minutes  of  the  Indian  Currency  Committee,  p.  240. 

*\n  this  amount,  the  old  rupees  re-coined  after  the  passage  of  the  law  of  1835  are 
purposely  not  included. 


Rx. 

275.053,443 

60,241,386 

335,294,829^ 

2.352,399 
93.045 

IMPORTS    OF    PRECIOUS    METALS. 

§  II.       IMPORTS    OF    PRECIOUS    METALS  INTO    INDIA. 

Amount  of  silver : 

Rx.  Rx. 

Total  Import  Imports  Less  Exports 
1835-6— 1884-5                          319,183,600  263,813,338 

1885-6— 189I-2  80,347,557  71.372,993 


399.531.157  335.186,331 

137,083,018  127,888,103 

1885-6— 189I-2  27,971,028  23,411,682 


Amount  of  gold  : 

1835-6-    1884-5  137,083,018  127,888,103 


165,054,046'  151,299,785 

A  comparison  of  these  figures  with  the  amount  of  silver  coins 
struck  shows  that  the  most  of  the  silver  imported  into  India  is 
coined.  It  would  be  a  mistake,  however,  to  draw  therefrom  the 
conclusion  —  as  is  very  frequently  done  —  that  all  these  coins  are 
now  in  use  as  money.  This  is  disclosed  by  the  following  facts  : 
The  imports  of  the  precious  metals  into  India,  in  the  first  place,  do 
not  depend  upon  the  needs  of  the  circulating  medium,  but  quite 
essentially  on  the  purchasing  power  of  the  people  ;  that  is,  on  the 
fact  whether  they  can  save  more  or  less  ;  and,  further,  whether 
certain  exceptional  events  demand  a  very  great  expenditure  in 
coin  by  the  Government,  etc.  A  cursory  glance  over  the  history 
of  imports  of  the  precious  metals  into  India  shows  us  this.  Previ- 
ous to  1855-6  the  imports  of  the  precious  metals  were  small; 
and  the  four  years  following  were  for  India  exceptionally  troub- 
lous. In  1857  there  broke  out  in  the  north  of  the  Empire  the 
frightful  uprising  of  the  Sepoys,  which  moved  the  British  Gov- 
ernment to  take  away  the  control  of  the  country  from  the  East 
India  Company  and  required  unusual  public  expenditures.  As 
a  consequence  there  was  imported  more  than  exported  from 
1855-6  to  1859-60: 

Rx.    50,362,475  silver, 
"      16,091,219  gold. 
The  next  two  years  were  normal.      In  1861,  however,  the  Amer- 
ican Civil  War  began.     The   Southern  states  of  the  Union   could 
'The  same  sources  as  given  above  for  the  coinage. 


6  INDIAN    SILVER    CURRENCY. 

no  longer  provide  the  Liverpool  market  with  cotton  ;  and  there 
ensued  that  frightful  crisis  for  the  Lancashire  industries  to  which 
the  English  have  given  the  fitting  name  of  the  "cotton  famine." 
From  India,  in  particular,  was  a  supply  of  the  indispensable 
raw  material  sought  for,  and  exceptionally  high  prices  were  paid 
for  it.  The  value  of  the  exports  of  cotton  from  India  rose  from 
Rx.  4.64  millions  (1859-60)  to  Rx.  27.57  millions  (1865-6). 
Conse(juently  the  imports  of  the  precious  metals  increased  very 
greatly  : 

Silver  Excess  Imports  Over  Exports 

1860-I  -  .  -  -  Rx.      5,328,009 

1865-6  --.--"       18,668,673 

Gold 
1860-I  .  -  -  -  "         4,232,569 

1865-6  ------         5,724.476 

The  next  years  were  quieter.  In  consequence  of  divers  bad 
harvests,  as  well  as  of  the  panic  in  India  succeeding  the  cotton 
famine,  a  considerable  decrease  in  the  imports  of  the  precious 
metals  ensued.  In  1870-1  only  Rx.  941,931  of  silver  was 
imported  in  excess  of  exports. 

After  1870  began  that  fall  in  the  price  of  silver,  the  chief 
causes  of  which  some  people  seek  for  in  the  increased  produc- 
tion of  silver,  and  others  in  the  continued  withdrawal  of  silver 
from  the  role  of  a  European  metallic  standard. 

However,  before  the  fall  in  the  price  of  silver  could  exercise 
its  full  influence  on  India,  a  frightful  catastrophe  befell  the 
country.' 

In  1875  the  monsoon  did  not  appear  in  Mysore;  a  great 
drought  and  a  fatally  bad  harvest  was  the  result.  In  the  summer 
of  1876  this  was  repeated  throughout  the  whole  Deccan.  In  the 
autumn  of  the  same  year,  the  northeast  monsoon  did  not  appear 
in  the  southeast  of  the  Presidency  of  Madras  ;  the  harvest  failed 
over  an  extensive  region ;  and,  since  the  harvest  of  1875  had 
been  small,  famine  prices  were  soon  demanded  everywhere. 
In  addition  the  drought  in  1877  had  reached  the  north  ;  the  pro- 
vinces of  the  northwest,  Punjab,  Räj])utäna,  and  the  Central  pro- 

'  Hunter,  The  Indian  Empire,  p.  429. 


IMFORTS    OF    PRECIOUS    METALS.  7 

vinces  suffered  dreadfully.  Until  1879  the  famine  continued; 
then  came  the  cholera,  which,  especially  in  the  limits  of  Madras, 
swept  off  hundreds  and  hundreds  of  thousands.  In  the  years 
1877  and  1878,  according  to  the  estimate  of  the  "  Famine  Com- 
mission," the  population  was  reduced  by  5.25  millions.  The 
result  of  this  unexampled  catastrophe  was,  oT^course,  a  serious 
decrease  in  the  purchasing  power  of  the  people  and  consequently 
of  the  imports  of  the  precious  metals.  In  1875-6  the  net 
amount  of  silver  imports  was  Rx.  1,555-355;  and  of  gold,  Rx. 
1,545,131.  Both  the  next  years  show  a  marked  importation  of 
silver,  because  the  Government  —  in  order  to  counteract  the  dis- 
tress—  sent  large  sums  to  India.  Yet  the  net  importation  of 
gold  fell  seriously,  amounting  in 

1876-7  to  Rx.  207,349 

1877-8  "  "  468,129 
and  in  1878-9  the  exports  exceeded  the  imports  by  Rx.  896,173, 
After  the  distress  was  removed,  the  purchasing  power  of  the 
Indian  people  again  increased.  The  balance  of  trade  was  never 
before  so  favorable.  The  imports  of  the  precious  metals 
increased  very  markedly.  In  the  years  1 880-1  to  1884-5  ^^^ 
average  yearly  excess  of  imports  over  exports  of  silver  amounted 
to  Rx.  6,080,727,  and  of  gold  to  Rx.  4,712,899 ;  in  1885-6  to 
1889-90  of  silver  to  Rx.  9,635,135,  and  of  gold  to  Rx,  3,072,343. 
Strange  to  say,  we  find  especially  large  imports  of  the  precious 
metals  in  1890-1.  The  American  coinage  law  raised  the  price 
of  silver,  which  for  a  time  (May  1889)  had  fallen  below  42 
pence,  to  54>^d.  (August  1890)  The  average  price  for  1890 
was  47|J'id.  as  compared  with  42yJ)d.  for  the  year  1889.  In 
connection  with  this  rise  in  the  [)rice  of  silver  there  followed  a 
movement  of  the  net  imports  of  silver  up  to  Rx.  14,175,136, 
It  is  generally  stated  that  this  import  in  great  part  originated 
with  speculators  ;  and  the  bank  statements  prove  this.  (Cf.  p.  4,) 
A  report  of  the  imperial  German  Consul-General'  at  Calcutta 
says  on  this  point:  "While  the  high  prices  of  silver  existed,  it 
was  profitable  to  bring  silver  to  India.     The  quantity  of  silver 

^Deutsches  Handelsarchiv,  1891,  vol.  ii.  p.  619. 


8  INDIAN    SILVER    CURRENCY. 

imported   in   the  year  1890-1  far  exceeded  the  needs  of  trade, 
and  this  silver  brought  into  India   for  the   purposes   of  specula- 
tion is  not  therefore  to  be  found  in  circulation,   but   rests  in  the 
bank  like  capital  waiting  for  investment."     According  to  this,  as 
/it  appears,  the  Indian  speculators  in  silver  were  waiting  for  a 
;  higher  rise  in  the  price  of  silver,  because  in  no  other  way  can  the 
;    phenomenon  be  explained.     There  apparently  existed  among  the 
people  no  need  for  this  quantity  of  silver ;  they  rather  profited 
■  by   the   opportunity   after   so   long  a  time  to  be  able  to  acquire 
gold  at  a  low  rate;  and  the  consequence  was  an  excess  of  imports 
of  gold  over  exports  of   Rx.    5,636,172.      The  reaction  soon  fol- 
lowed. 

When,  in  spite  of  the  Sherman  bill,  the  price  of  silver  in  1891 
again  dropped,  and  the  speculators  beheld  themselves  cheated  in 
their  expectations,  the  speculative  shipments  of  silver  again 
ceased;  but,  in  consequence  of  the  unusually  favorable  balance 
of  trade  (exports  of  goods  amounted  to  Rx.  108,173,592  as 
against  imports  of  Rx.  69,432,383)  the  excess  of  silver  imported 
rose  to  the  height  of  Rx.  9,022,184.  The  year  1892  brought  a 
very  precipitate  fall  in  the  price  of  silver,  the  quotation  in  the 
London  bourse  falling  below  38d.  That  was  an  opportunity  for 
the  Indians,  which  had  never  before  occurred,  to  get  silver  in 
exchange  for  gold  ;  never  before  could  one  buy  so  much  silver 
with  one's  gold.  Hence  the  Indian  statistics  for  1892-3  show 
the  phenomenon,  to  that  time  unheard  of  (except  the 
unusual  case  of  the  famine  of  1878-9  in  which,  however,  the 
excess  of  exports  over  imports  of  gold  was  only  Rx.  896,173)  of 
y^  an  excess  of  exports  over  imports  of  gold  of  Rx.  2,812,683.  At 
the  same  time  the  imports  of  silver,  of  course,  rose,  since  the 
balance  of  trade  continued  to  remain  favorable ;  although  the 
height  of  the  net  imports  of  silver  in  the  year  1 890-1,  namely 
Rx.  12,863,569,  was  not  reached. 

§  III.       THE    USE    OF    THE    PRECIOUS    METALS    IN    INDIA. 

From  what  has  been  said  in  the  previous  section  it  appears 
that  the  imports  of  silver  into  India  depend  upon  anything  rather 


USK    Ol'    THE    PRECIOUS    METALS. 


than  upon  the  needs  of  the  country's  cuculating  medium.  We 
found,  to  be  sure,  that  almost  all  the  imported  silver  is  coined  ; 
but  that,  however,  is  far  from  saying  that  these  silver  coins 
remain  in  circulation.  In  many  cases  the  coining  appears  to 
have  value  to  the  native  only  in  that,  when  he  has  a  rupee,  he 
knows  exactly  how  much  of  the  commodity  silver  he  has.  All 
experts  on  Indian  conditions  agree  on  these  points. 

Sir  David  Barbour,  in  his  estimate  of  June  21,  1892,  states 
the  existing  circulation  of  rupees  to  be  Rx.  1 1  5,000,000.'  Accord- 
ing to  other  very  careful  computations,  it  is  Rx.  120,000,000; 
while  the  figure  stated  by  Ottomar  Haupt,  of  Rx.  180,000,000, 
is  probably  too  high.  It  should  not,  however,  escape  attention 
that  the  coined  rupees  are  shipped  again  to  a  very  considerable 
amount  out  of  the  country  ;^  for  the  Indian  rupee  supplies  the 
medium  of  exchange  for  East  Africa,  Ceylon,  and  the  countries 
on  the  Persian  Gulf.  By  far  the  greatest  part  of  the  exports  of 
silver  from  India  go  to  the  countries  mentioned; 3  while  to 
Europe  a  very  small  amount  of  silver,  and  to  America  and 
Australia  absolutely  none,  is  exported.  An  exact  determination 
of  the  amount  of  rupees  to  be  found  in  actual  circulation  in 
India  is  absolutely  impossible,  because,  as  has  been  already 
expounded,  great  quantities  of  silver  in  the  form  of  coins  are 
hoarded,  and  it  is  not  easy  to  draw  the  line  between  the  hoarded 
rupees  and  those  which  might  again  come  into  circulation. 

It  has  long  been  recognized  that  the  hoards  in  India  were 
exceedingly  large,  and  yet,  until  recently  it  was  impossible  to 
get  authentic  information  thereon.  The  experts  heard  before  the 
various  English  commissions  have  expressed  themselves  wholly 
in  generalities.  It  was  hence  very  commendable  in  Sir  David 
Barbour   that,   in    1886,   he   began   exact    investigations   on   this 

'Appendix  to  Minutes  of  Indian  Currency  Coininittee,  p.  147.     Cf.  also  p.  273. 

*  For  the  regions  under  the  control  of  Germany,  German  rupees  are  now  struck. 

3  According  to  the  statements  of  the  Statistical  Abstract  these  are  : 

To  Ceylon  To  Africa  To  Arabia  and  Persia 

1889-90  Rx.  602,221  Rx.  217,564  Rx.  236,366 

1890-91  "    650.750  "     188,930  "     142,038 

1891-92  "     769.150  "       51,333  "     281,532 


10  INDIAN    SILVER    CURRENCY. 

highly  important  matter,  the  results  of  which  he  laid  before  the 
Royal  Gold  and  Silver  Commission.' 

During  his  eight  years  of  activity  as  Magistrate  and  Collec- 
tor (the  highest  administrative  ofificerof  a  district)  in  the  inte- 
rior of  the  Indian  Empire,  in  daily  contact  with  the  native  popu- 
lation, this  eminent  financier  had  a  rich  opportunity  to  get  exact 
information  on  the  conditions  in  question. 

In  the  first  place,  it  is  true  of  both  metals  that  they  are 
changed  into  ornaments  in  extraordinary  quantities.  Even  the 
"globe-trotter"  hurrying  through  the  country  with  the  speed  of 
an  express-train  is  impressed  with  the  way  in  which  the  natives 
are  loaded  with  the  precious  metals.  One  cannot  take  up  a 
book  of  travels  on  India  in  which  the  author  does  not  give  expres- 
sion to  his  amazement  on  this  point.  Just  as  soon  as  the  Indian 
has  saved  anything,  he  buys  himself  an  ornament,  the  rich,  one 
of  gold,  the  less  wealthy,  one  of  silver. 

So  far  as  gold  is  concerned,  it  is  the  article  of  an  extensive 
trade  in  India.  The  gold-traders  obtain  their  gold  in  Calcutta 
or  Bombay,  and  sell  it  in  small  quantities  to  the  people  who 
desire  it.  According  to  the  assurances  of  the  experts,  when  a 
banker,  or  gold-trader,  does  business  with  an  Indian,  he  is  always 
ready  to  take  gold  in  payment,  because  he  knows  its  market 
price,  and  can  almost  always  carve  out  a  profit.  Gold  mostly 
circulates  in  the  form  of  sovereigns,  or  of  bars  weighing  lo  oun- 
ces, yVW  fi^^-  Still,  one  cannot  speak  of  a  gold  circulation  in 
the  ordinary  sense  of  the  word :  it  is  only  an  article  of  trade. 

A  relatively  small  quantity  of  gold  is  directly  lost.  This 
holds  true,  for  example,  of  the  cloths  worked  with  gold,  which 
frequently  contain  lO  per  centum  of  gold.  The  gold  can  be 
recovered,  it  is  true,  by  burning  the  material ;  but  it  is  said  not 
to  happen  frequently. 

We  learn  from  Delhi  of  a  remarkable  way  of  using  gold." 
In  the  native  ceremonial,  if  one  wishes  to  give  a  visitor  a  sign  for 
his   departure,   he  gives  him  a  "pledge,"  i.  e.  a  little  ornament, 

'  First  Report,  Questions  1095  et  seq. ;  as  well  as  Appendix  V,  A-D. 
'  First  Report  of  Gold  and  Silver  Commission,  Question  1 131. 


USE    OF    THE    PRECIOUS    METALS.  II 

which  contains  a  small  (luantity  of  gold.  Although  the  (juantity 
of  the  preciou-s  metal  contained  in  it  is  too  diminutive  to  permit 
the  receiver  to  convert  it  into  value,  yet  —  what  is  undoubtedly 
only  a  remotely  approximate  estimate  —  about  ;^I00  are  daily 
used  in  Delhi  for  "pledges"  for  guests. 

A  great  quantity  of  gold  escapes  into  the  treasuries  of  the 
Rajahs.  Mr.  Barbour  laid  before  the  Gold  and  Silver  Commis- 
sion, for  example,  a  detailed  description  of  the  stored-up  wealth 
of  the  Maharajah  of  Burdwan.  Seven  great  vaults  are  filled  with 
gold,  silver,  and  precious  stones,  all  worked  up  into  dishes,  table- 
equipment,  articles  for  religious  ceremony,  and  even  stools  and 
tables  ;  besides,  there  are  heaps  of  coins  and  uncoined  metals. 
These  vaults  are  under  the  charge  of  the  Ranee,  although  even 
she  may  enter  them  only  in  the  company  of  the  Rajah.  An 
extract  from  a  report  of  a  post-of^ce  official,  who  is  regarded  as 
especially  trustworthy,  which  was  published  at  the  same  time,  is 
interesting.'  He  ascertained  from  a  native  prince  that  he  annu- 
ally caused  ;^40-45,000  of  gold  to  be  bought  in  Bombay  and 
Calcutta  and  sent  with  the  greatest  secrecy  to  his  residence,  to 
be  stored  there.  At  the  conclusion  he  says:  "If  inquiry  be 
made,  it  will  most  probably  be  found  that  this  is  really  the  case ; 
but  the  mischief  which  such  an  inquiry  will  cause  by  exciting 
distrust  and  suspicion  of  the  real  intentions  of  the  government 
will  be  serious,  and  should  not,  I  think,  be  risked  without  urgent 
reasons,  and  then  only  with  great  caution."  It  is  seen  from  this 
what  strong  reason  there  is  for  not  possessing  as  yet  any  authen- 
tic, official  information  as  to  the  hoards. 

The  stored-up  treasures  are  treated  like  a  gallery  of  ances- 
tors ;  they  are  not  drawn  upon,  so  long  as  any  other  shift  is  pos- 
sible, and  it  is  regarded  as  a  matter  of  family  honor  not  to  touch 
them.  Thus,  Mr.  Barbour  tells  of  a  prince  who,  although  at  his 
death  he  left  ;^4,000,000  —  a  great  part  of  it  in  precious  metals 
—  in  the  year  1877  willingly  allowed  ^^500, 000  to  be  advanced 
by  the  government  rather  than  draw  upon  the  family  treasure. 

The  quantities  of  the  precious  metals,  likewise,  which  are  col- 

'  First  Report  of  Gold  and  Silver  Commission,  p.  323. 


12  INDIAN    SILVER    CURRENCY. 

lected  in  the  temples  are  very  considerable.     These  are  quite  as 
unlikely  to  be  touched  as  those  in  the  vaults  of  the  princes. 

The  answer  to  the  question,  What  is  done  with  the  silver?  is 
much  more  difficult.  For,  in  this,  one  does  not  have  to  do  with 
a  relatively  small  number  of  rich  people,  but  with  the  millions 
on  millions  who  make  up  the  mass  of  the  Indian  population.  In 
order  to  obtain  at  least  a  foundation  for  this  matter,  E.  J.  Sinkin- 
son,  Accountant  General  of  the  Punjab,  at  the  suggestion  of  Mr. 
Barbour,  in  1886  tried  to  ascertain  how  much  silver  was  absorbed 
by  the  mountain  population  of  Simla.  The  conditions  existing 
here  are  exceedingly  favorable  for  an  investigation  of  this  sort. 
It  is  one  of  the  smallest  districts  of  all  India,  containing  in  its 
limits  of  102  English  square  miles  44,642  inhabitants.'  It  is 
wholly  shut  in  by  mountains.  Owing  to  the  presence  of  a  great 
number  of  Europeans  during  the  summer  —  Simla  is,  as  is  well 
known,  the  residence  of  the  Central  Government  of  the  Indian 
Empire  in  summer  —  much  money  is  expended  there  which  does 
not  flow  back  to  the  plains.      Mr.  Sinkinson's  report  says :  ^ 

"The  silver  remittances  from  treasuries  in  the  plains  to  Simla 
and  Kasanli  (a  sub-treasury  of  Simla)  during  the  last  25  years 
have  been  as  follows  : 

1861-1886,  Total,  Rs.  66,402,850. 

"The  amount  of  silver  brought  to  Simla,  otherwise  than  in 
remittances  on  account  of  government,  may  be  neglected. 
European  and  native  bankers  and  traders  replenish  their  resour- 
ces when  necessary  by  currency  notes  which  the  Simla  treasury 
is  always  prepared  to  cash. 

"The  amount  of  silver  brought  by  visitors  is  insignificant. 
Remittances  of  coin  to  the  plains  are  never  made,  either  by  the 
Government,  or  bankers,  or  merchants.  Remittances  are  made 
either  by  currency  notes  or  by  treasury  bills  on  Bombay,  Cal- 
cutta, Umballa,  Lahore  and  Delhi,  which  the  treasury  is  always 
prepared  to  grant. 

'  Census  Report  of  i8g/,  p.  19. 

'  First  Keport  0/  Gold  aud  Silver  Commission,  Appendix  V,  A. 


USE    OF    THE    PRECIOUS    METALS.  13 

"The  currency  notes  supplied  to  the  Simla  treasury  during 
the  last  three  years  have  been  : 

■'  Rs. 

1883-4 834,000 

1884-5 1,345.000 

1885-6              -----  1,541,000 

"The  treasury  bills  issued  by  Simla  treasury  during  the  last 
three  years  have  been  : 

Rs. 

1883-4          -----  780,700 

1884-5 -     1,475.400 

1885-6  .        .        -        .         -         1,969,500 

"The  aggregate  of  these  notes  and  bills  represent  remittances 
on  account  of  banking,  trading,  etc.,  made  to  the  plains. 

"A  portion  of  the  silver  sent  to  Simla  by  government  event- 
ually returns  to  the  plains.  The  Simla  market  is  supplied  with 
cattle,  grain,  and  miscellaneous  supplies  largely  from  the  plains. 

"A  large  portion  of  these  supplies  is  brought  by  intinerant 
peddlers,  who  take  back  cash  with  them  for  fresh  purchases  in  the 
villages  where  currency  notes  would  not  be  accepted.  I  have 
not  been  able  to  procure  any  satisfactory  information  from  the 
Simla  octroi  returns,  as  it  is  impossible  to  make  any  accurate 
distribution  of  the  amount  of  business  done  by  large  dealers, 
who  would  not  remit  cash,  and  by  intinerant  traders  with  small 
capital,  who  take  back  cash.  Most  of  the  grain  supply  of  Simla 
is  brought  up  by  Zamindars  from  Ludhiana  and  Ferozepore,  who 
take  back  coin.  The  retail  grain  dealers  are  mostly  Hosiarpore 
and  Kaugra  men,  who  come  to  Simla  for  the  season,  and  are 
believed  to  take  back  their  profits  in  coin.  The  cost  of  carriage 
of  supplies  is  also  considerable,  and  nearly  all  of  it  is  taken  back 
in  cash.  So  are  the  savings  of  carpenters,  masons,  and  domestic 
servants  from  the  plains.  Looking  to  the  class  of  people  who 
take  back  coin,  and  to  the  fact  that  it  is  certainly  not  taken  in 
large  quantities  at  a  time,  I  do  not  think  that  it  can  exceed  one- 
third  of  the  amount  sent  to  Simla  by  the  Government,  or  about 
Rs.  1,100,000  yearly.  Applying  this  to  the  results  of  the  past 
six  years,  it  may  be  taken  that  the  present  annual  absorption  of 
silver  by  the  hill  population  is  about  Rs.  2,200,000  a  year. 


V 


14  INDIAN    SILVER    CURRENCY. 

AMOUNT    OF    SILVER    SENT    TO    SIMLA. 

Rs. 
1880-I  -  -  -  .  .  3,293,000 

1881-2 3,200,000 

1882-3 3,288,000 

1883-4 4,115,00c 

1884-5 3,148,000 

1885-6 2,468,000 

3)  19,512,000 

6,504,000 

6)  13,008,000 

2,168,000 

This  result  is  the  more  curious  when  it  is  considered  how 
sparse  the  hill  population  is,  and  that  the  Thibet  traders  ordi- 
narily take  back  grain  and  not  silver.  I  think  that  the  hill  popu- 
lation is  acquiring  wealth  rapidly.  It  is  certain  that  many  of 
the  hill  rajahs,  notably  those  of  Rampore,  Busahir,  and  Bilas- 
pore,  have  accumulated  large  stores  of  silver ;  and  it  cannot  have 
escaped  observation  how  the  fact  of  growing  wealth  is  reflected 
in  the  amount  of  silver  and  gold  ornaments  now  worn  by  hill 
women.  It  is  nearly  10  years  since  I  first  came  to  Simla,  and 
the  change  in  this  respect  in  that  period  is  sufficiently  striking." 

Of  the  silver  thus  absorbed,  it  is  certain  that  only  a  small 
part  remains  in  circulation  ;  but  one  may  not  generalize  from  the 
example  of  the  mountain  people  without  wider  knowledge,  for 
there  are  probably  few  places  in  India  where  the  people  have 
such  favorable  chances  for  large  earnings  as  at  the  summer 
residence  of  the  viceroy. 

In  regard  to  the  amount  of  the  silver  circulation,  the  fact 
should  not  escape  attention  that  probably  in  no  country  of  the 
world  are  there  so  many  money-lenders,  or,  as  the  English  some- 
what euphemistically  call  them,  bankers,  as  in  India.  Sir 
Richard  Temple  estimates  their  number  at  250,000,  or  nearly 
TTTTTü"  of  the  population.'     They,  of  course,  always  possess  con- 

^  Journal  of  the  Institute  of  Bankers,  1890,  p.  300.  This  figure  cannot  be  an  over- 
estimate, for  according  to  the  last  enumeration  the  number  of  money-lenders  and  their 
dependents  amounted  to  1,128,288.  Under  this,  however,  are  included  pawn-lenders, 
who  in  the  country  appear  to  do  a  "  banking "  business  frequently  in  the  form  of 
making  advances  on  ornaments. — Census  Report,  p.  107. 


USE    OF    THE    PRECIOUS    METAI.S. 


15 


siderable  ready  money.  Still,  the  aniount  of  this  should  not  be 
overestimated  ;  for  a  great  part  of  the  business  is  so  conducted 
that  the  banker  (almost  every  village  has  one)  advances  corn  in 
kind  to  the  farmer  at  the  planting-season,  and  has  it  paid  back 
to  him  again  after  the  harvest  with  usurious  interest. 

On  the  question  of  the  distribution  of  the  precious  metals  a 
letter  from  a  former  Inspector-General  of  Police  in  Punjab,  pub- 
lished in  the  London  Economist ,^  is  interesting.  This  ofificial  had 
prepared  an  approximate  estimate  of  the  amount  of  gold  and 
silver  which  was  stolen  for  three  years  in  the  Punjab,  and  arrived 
at  a  sum  of  about  Rx.  60,000  for  each  metal.  While  this  sum 
of  silver,  however,  was  spread  over  the  whole  land,  gold  was 
stolen  chiefly  in  only  those  districts  which  contain  the  larger 
cities,  such  as  Delhi,  Amritsur,   Peshawur,  Multan. 


Is  there  no  prospect  that  some  of  the  enormous  masses  of  the 
precious  metals  which  have  disappeared  in  India  in  the  course  of 
thousands  of  years,  may  again  come  to  light  ?  Only  in  case 
the  balance  of  payments  of  the  country  should  disclose  a  per- 
manent indebtedness.  At  the  time  of  a  general  famine  the 
imports  of  gold,  to  be  sure,  diminish  —  nay,  are  even  converted 
into  an  export  of  gold ;  yet,  this  is  naturally  only  a  passing 
phenomenon.  At  the  close  of  the  seventies,  as  already  men- 
tioned, a  frightful  famine  raged  in  the  most  dissimilar  parts  of  the 
mighty  empire  ;  at  that  time  the  gold  movement  of  the  country 
amounted  in  Rx.  to  : 


Imports  of  Gold 

Exports  of  Gold 

Excess 

1875-76  

1,836,381 
1,443,711 

(   i;78  Q27 

291,250 
1,236,362 

1    I  rn  -rnS 

1,545,131 

207.349 

468,129 

-896,173! 

1,750,504 

1876-77  

1877-78  .. 

1878-79  . 

I  463  O^O               '               '  li.c\  001 

1879-80  

2,050,393 

299,889 

Average 

1,674,492 

1,059,504 

614,988 

At  other  times  the  excess  of  gold   imports   is  about    8  to    10 
•No.  2582  (February  i8th,  1893),  P-  205. 


i6 


INDIAN    SILVER    CURRENCY. 


times  as  large  as  during  these  years  of  famine.  The  year 
1892-3,  however,  presents  a  very  marked  exception,  such  as  the 
Indian  statistics  had  never  before  recorded.  The  imports  of  gold 
amounted  to  Rx.  1,781,789,  the  exports  on  the  other  hand  to 
Rx.  4,594,472;  hence  excess  of  exports  was  Rx.  2,812,683. 
These  facts  permit  no  other  explanation  than  that  the  natives, 
because  of  the  strikingly  low  quotations  of  silver  —  or,  as  seen 
from  their  standpoint,  because  of  the  strikingly  high  quotations 
of  gold,  —  were  induced  to  exchange  their  gold  for  an  extraordi- 
narily large  amount  of  silver. 

The  influence  of  a  famine  makes  itself  felt  in  silver  in  that 
more  ornaments,  old  silver  coins,  etc.,  are  sent  in  to  the  mint. 
Although  the  amount  of  ornaments  so  coined  is  quite  small  in 
ordinary  years,  yet  from  1877  to  1880  Rx.  4,500,000  of  silver 
ornaments  came  to  the  mints  at  Bombay  and  Calcutta.  The 
imports  of  silver  did  not  diminish  in  these  years,  because  the 
Government  sent  large  amounts  of  silver  to  India  in  order  to 
institute  measures  of  relief  with  the  necessary  energ}'. 

Very  gradually  a  few  enlightened  people  are  beginning  to 
find  it  profitable  to  invest  their  savings,  after,  so  to  speak,  a  more 
European  fashion,  instead  of  buying  ornaments  with  them,  or 
burying  precious  metals  in  the  earth  ;  thus  there  is  already  said 
to  be  in  the  hands  of  the  natives  a  very  considerable  part  of  the 
stock  of  the  cotton  mills  in  the  presidency  of  Bombay. 

But  the  savings  banks  also  are  becoming  more  and  more 
naturalized.     The  deposits'  amounted  to  : 


Total  Deposits 
Rx. 


1884-85 4,687,082 

1885-86 5,081,183 

1886-87 5.795,249 

'887-88 6,675,571 

1888-89 7,622,544 

1889-90 7,531,868 

'890-91 8,062,241 

1891-92 8,886,372 


Financial  Staieinent,  1 893-4,  P-  70. 


Average  Deposit 
Rx. 


USE    OF    THE    PRECIOUS    METALS. 


As  can  be  inferred  from  the  decrease  in  the  average  amount  of 
the  single  deposits,  people  of  small  means  are  beginning  to  make 
use  of  the  savings  banks.  The  same  phenomenon  is  evidenced 
by  the  Postal  savings  banks.  The  statistical  abstract  gives  the 
following  figures  :' 


Number  of  Native 
Depositobs 

Deposits  of  Natives 
Rx. 

Average  Deposit 
Rx. 

1887-88  

227,865 
273,696 
315,121 
362,368 
411,107 

4,223,252 

q,oo8,203 
5.047.546 
S,S70,820 
6,170,175 

185 

I888-S9  

1889-90  

1890-91  .                ... 

183 
160 
154 
I  50 

1891-92 

For  the  year  1889-90,  it  was  reported  : 

"The  figures  of  the  last  two  years  seem  to  show  that  the 
savings  bank  system  is  beginning  to  reach  the  agricultural  popu- 
lation in  the  districts.  The  number  of  depositors  who  are  far- 
mers is  almost  twice  as  great  as  it  was  two  years  ago  ;  and  the 
increase  of  this  class  of  depositors  in  1889-90  was  42.62,  a  far 
higher  percentage  of  increase  than  in  the  depositors  of  any 
other  class." 

Yet,  probably  all  this  above-mentioned  tendency  cannot 
easily  eradicate  hoarding  from  the  habits  of  the  people ;  it  is  a 
usage  much  too  deeply  rooted.  For  centuries  have  the  unwar- 
like  Hindoos  been  accustomed  to  be  robbed  of  their  property  by 
the  bold  Mahrattas,  often  too  by  robbers  ;  too  frequently  had  the 
enemy  invaded  the  country  and  despoiled  it  of  what  they  could 
find.  In  addition  to  this,  an  Asiatic  ruler  seldom  had  any  other 
purpose  than  to  fill  his  own  purse  as  quickl}-  as  possible  with  the 
wealth  of  his  subjects.  Consequently,  nothing  was  more  natural 
than  that  the  native,  never  sure  of  his  possessions  for  an  hour, 
should  acquire  the  habit  of  investing  his  money  in  objects  which 
could  be  easily  hidden,  such  as  precious  metals  and  jewels.  Con- 
sideration, moreover,  must  be  given  to  the  wife  and  children. 
Even  if  a  man  knows  that  he  is  acting  more  wisely  when  he 
invests  his  savings  in  securities,  in  savings  banks,  etc.,   still  after 

^  Statement  on  Moral  and  Material  Progress  of  India,  p.  l8o. 


l8  INDIAN    SILVER    CURRENCY. 

his  death  his  widow  would  be  at  a  loss,  because  an  uninstructed 
Hindoo  woman  would  not  know  what  to  do  with  the  documents. 

It  was  an  advantage  for  Europe  and  America  that  the  native 
Indians  persisted  in  their  ancient  customs.  If  there  were  no 
export  of  silver  from  Europe  to  India,  the  price  of  silver  must 
have  fallen  in  a  fashion  radically  different  from  that  which  has  so 
far  taken  place ;  for  the  largest  and  most  regular  customer  would 
have  been  taken  away.  This,  however,  has  not  always  been  so 
regarded.  In  the  fifties  and  sixties  when,  in  consequence  of  the 
discoveries  of  gold  in  California  and  Australia,  gold  was  almost 
the  only  metal  coined  in  the  countries  of  Europe  having  a 
double-standard,  and  when  silver  on  the  other  hand  flowed  away 
to  India,  which  took  large  amounts  because  of  the  Sepoy  Rebel- 
lion and  the  "cotton  famine,"  a  very  real  solicitude  was  widely 
entertained.  A  report  of  the  Chamber  of  Commerce  at  Bombay 
to  the  viceroy,  Sir  John  Lawrence,  in  the  year  1864,'  runs  : 

"9.  That  India  alone,  therefore,  has  consumed  during  the 
last  six  years  on  an  average  15  per  cent.,  and  last  year  nearly  50 
per  cent.,  more  silver  than  the  world  annually  produces. 

"II.  That  great  scarcity  and  enhancement  in  the  value  of 
silver  must  inevitably  ensue  from  this  excessive  disproportion 
between  demand  and  supply. 

"12.  That  the  inevitable  decrease  in  the  amount  of  our 
currency,  therefore,  just  at  a  time  when  the  amount  of  com- 
modities to  be  circulated  has  so  enormously  increased,  and  a 
consequent  violent  derangement  of  prices,  cannot  fail  to  be  most 
disastrous  to  India. 

"13.  That  the  continued  drain  of  silver  for  India  must 
derange,  if  not  eventually  destroy,  the  silver  currency  of  all 
other  nations. 

"  14.  That  it  is  the  interest  of  the  world,  as  well  as  of  India, 
to  check  the  exhaustive  drain  of  silver,  by  the  introduction  of 
gold  into  our  currency." 

If  gold  were  to  be  substituted  for  the  word  "silver"  in  this 
interesting  extract,  it  might  be  thought  we   were   listening  to  a 

^Papers  Relating  to  a  Gold  Currency /or  India,  London,  1865,  pp.  7  et  seq. 


USE    OF    THE    PRECIOUS    METALS.  19 

Cassandra-like  warnintr,  such  as  arc  now  the  order  of  the  day  in 
regard  to  the  exports  of  gold  to  India.  The  fear  is  now  often 
expressed  that  the  continued  movement  of  gold  to  India  must 
bring  confusion,  if  not  eventual  destruction,  to  the  gold  standard 
of  all  other  nations.  It  remains  to  wait  and  see  whether  this  fear 
is  better  founded  than  that  entertained  in  regard  to  the  silver 
standard  thirty  years  ago  by  the  first  Chamber  of  Commerce  of 
the  Indian  Empire.  The  production  of  gold  has  until  now  sufficed 
to  supply  the  needs  of  the  civilized  world  as  well  as  of  India. 
And  even  if,  in  the  further  development  of  the  latest  monetary 
reform,  a  limping  gold  standard  should  be  established  in  India, 
gold  would  then,  as  always  before,  be  required  on  the  whole  only 
for  foreign  trade  and  the  inland  hoards  ;  a  very  small  amount 
would  be  required  for  the  inland  medium  of  exchange,  because 
gold  coins,  in  by  far  the  greatest  number  of  Indian  exchanges, 
represent  far  too  great  a  value.  That  the  Indian  demand  for 
silver,  even  after  the  cessation  of  the  free  coinage  of  silver,  will 
cease  abruptly,  is  scarcely  to  be  supposed  ;  for  it  is  precisely  the 
vast  masses  of  people,  who  have  hoarded  their  little  savings  in  the 
form  of  silver  from  the  earliest  times  ;  and  it  is  impossible  for  them 
to  transfer  these  into  gold,  because  for  them  gold  is  so  dear  as  to 
be  out  of  reach.  There  is  yet  a  further  consideration  :  accord- 
ing to  the  estimate  of  Mr.  Barbour,  in  a  population  of  287  mil- 
lions and  an  active  circulation  of  1150  millions  of  rupees,  there 
are  only  four  rupees  per  capita,  a  very  extraordinarily  small  sum, 
even  in  comparison  with  the  poorest  countries  of  Europe.  This 
is  explicable  only  on  the  ground  that  the  vast  mass  of  the  Indian 
population  are  yet  living  wholly  in  a  state  of  barter.  This 
extends,  as  the  last  census  reports  emphasize,  over  the  entire 
country  population,  and  the  Indian  agricultural  population,  to 
the  number  of  260  millions,  make  up  the  enormous  majority  of 
the  inhabitants.  The  "village  community,"  which  is  spread 
over  all  India,  forms  a  world  in  itself,  and  the  village  artisans, 
among  whom,  strangely  enough,  the  jeweler  belongs,  are  paid  by 
barter,  either  bv  the  conveyance  of  a  piece  of  land,  or  by  a  share 
of  the  harvest.      But,  in  more  recent  times,  elements  have  joined 


20  INDIAN    SILVER    CURRENCY. 

this  microcosm,  which  are  not  essentially  its  own  ;  and  the  small 
dealers,  the  grain-traders,  etc.,  form  the  means  of  communica- 
tion with  the  outside  world.  Inasmuch  as  these  trade  from  vil- 
lage to  village,  they  no  longer  depend  upon  barter,  but  use  money 
in  their  transactions.  With  the  development  of  trade  these 
dealers  penetrate  deeper  and  deeper  into  the  interior  of  the 
country,  and  thus  conduce  to  the  extension  of  the  monetary 
regime.  The  more  this  is  widened,  the  greater  will  undoubtedly 
be  the  demand  for  a  metallic  medium  of  exchange  in  India. 
Then,  since  the  hoards,  as  we  said  above,  are  for  the  greater  part  com- 
posed of  coined  rupees,  an  increased  demand  for  the  circulating 
medium  will  probably  be  first  supplied  from  these  ; '  so  much  the 
more,  since  recently  the  native  obtains  for  the  coined  rupee  more 
silver  than  the  weight  of  the  silver  in  the  rupee.  If  these  coins, 
coming  out  of  the  hoards  into  free  circulation,  should  be  re])laced 
by  hoards  of  uncoined  silver,  a  larger  import  of  silver  would 
thereby  be  occasioned.  In  the  remoter  future,  however,  should 
the  natives  perceive  that  uncoined  stores  of  silver  —  in  conse- 
quence of  the  cessation  of  the  free  coinage  of  silver  —  are 
exchanged  only  at  a  loss,  then  coined  silver  would  be  again  pre- 
ferred for  hoarding  purposes,  that  is  for  the  laying  up  of  an 
"honest  penny."  Then  the  Government  which  has  reserved  to 
itself  the  right  to  coin  the  silver  in  case  of  need,  would  be 
obliged,  in  order  to  satisfy  an  increasing  demand  for  the  circula- 
tion, to  coin  a  larger  amount  of  silver,  and  to  import  it  into 
India  for  this  purpose. 

From  all  these  considerations  it  can  scarcely  be  claimed  — 
as  has  so  often  been  done  either  by  the  advocates  of  the  gold 
standard,  or  by  the  bimetallists,  in  the  first  shock  on  the  cessa- 
tion of  Indian  coinage  —  that  the  role  of  silver  has  been  played 
to  the  last  act ;  since,  so  long  as  the  vast  masses  of  people  in 
eastern  Asia  hold  fast  to  silver,  it  is  not  to  be  suj)posed  that  it 
has  lost  its  character  as  a  money  metal. 

"Mr.  Goschen  called  attention  to  this  possibility  in  the  House  of  Commons, 
December  13,  1893. 


CHAPTER  II. 

THE  INFLUENCE  OF  CHANGES  IN  THE  PRICE  OF  SILVER  ON 
TRADE,  AND  ON  THE  INDUSTRIAL  AND  AGRICULTURAL 
PRODUCTION  OF  INDIA. 

§    I.       FLUCTUATIONS    OF    THE    EXCHANGES. 

Up  to  the  cessation  of  the  free  coinage  of  silver  in  India  — 
ordained  in  1893  —  complaint  was  especially  made  of  two  evils 
which  made  themselves  felt  in  the  trade  with  countries  having  a 
gold  standard:  (i)  the  violent  fluctuations  in  the  rate  of 
exchange,  and  (2)  the  depreciation  of  silver.  Each  of  these 
must  be  sharply  distinguished  from  the  other.  First,  we  shall 
treat  of  the  effect  of  the  continual  fluctuations  of  the  rupee  on 
the  foreign  trade  of  India.  Upon  the  importance  of  it  opinions 
are  divided  :  as  it  is,  very  many  experts  assure  us  that  the  repre- 
sentations on  this  subject  are  very  much  exaggerated.  Almost 
all  the  experts  called  before  the  Gold  and  Silver  Commission,  as 
well  as  before  the  Herschell  Committee,  admit  that  in  normal 
times  those  engaged  in  trade  can  protect  themselves  against  the 
fluctuations  in  the  rate  of  exchange  which  take  place  between  the 
reception  of  the  order  and  the  delivery  of  the  goods  ordered. 
The  Indian  importer  first  simply  transmits  by  telegraph  to  his 
European  house  the  orders  which  come  to  him  from  the  home 
merchant.  Only  on  a  confirmed  order  is  work  begun ;  con- 
signees are  unwilling  to  keep  warehouses  full  of  goods  ready  for 
sale  on  account  of  the  great  risk.  On  the  completion  of  the 
order,  the  importing  house  [in  India]  can  protect  itself  against 
the  fluctuations  of  exchange  by  buying  of  a  banker  on  the  spot 
gold-values  to  the  amount  of  the  rupees  which  he  is  to  receive 
on  the  delivery  of  the  goods  from  the  one  who  gave  the  order. 
Of  course,  the  banker  does  not  undertake  this  risk   for  nothing; 


22  INDIAN    SILVER    CURRENCY, 

Still  the  premium  may  be  small,  because  there  exists  a  great 
market  for  bills  to  and  from  India,  as  well  as  for  Government 
bills.  Only  in  times  of  very  violent  fluctuations  are  the  bankers 
said  to  refuse  to  buy  or  sell  bills,  at  longer  time  than  the  trade 
with  India  demands,  to  customers  to  whom  they  do  not  have  to 
pay  especial  attention. 

In  other  ways,  too,  just  such  violent  fluctuations  of  the 
exchanges  are  undesirable  for  trade;  in  such  times  the  Indian 
holds  back  his  orders  entirely,  and  it  is  credible  that  —  as  is 
pretty  generally  asserted  —  in  periods  of  violent  fluctuations  in 
the  rate  of  exchange,  trade  for  a  time  comes  to  a  complete  stand- 
still. 

The  importer  gets  into  a  bad  situation  when,  by  some  unfor- 
tunate circumstance  such  as  cannot  be  avoided  in  the  trade  with 
so  distant  a  land  as  India,  the  delivery  of  the  goods  is  delayed 
and  meanwhile  the  rate  of  exchange  has  fallen ;  in  such  a  case 
it  is  said  to  happen  frequently  that  the  Indian  dealer  refuses  to 
fulfill  his  contract,  and  the  importing  house  has  to  carry  the  loss. 
In  such  cases  a  compromise  is  generally  made  at  a  lower  price, 
and  the  sums  thus  lost  are  said  to  be  not  inconsiderable.' 

To  this  point  have  we  gone  in  picturing  the  processes  by  which 
the  Indian  importer  finds  it  possible,  in  normal  times  during  the 
existence  of  a  silver  standard,  to  give  orders  on  the  basis  of  gold 
values  to  the  European  manufacturer.  If,  however,  a  European 
manufacturer  was  found  ready  to  take  orders  on  the  basis  of  the 
rupee-standard,  then  the  protection  from  the  exchanges  was,  of 
course,  the  concern  of  the  manufacturer. 

To  what  extent  the  firms  engaged  in  the  Indo-European 
trade  protect  themselves  against  fluctuations  in  the  rate  of 
exchange  by  time-contracts  in  bar-silver,  I  could  not  learn.  A 
time-contract  in  silver  would  have  exactly  the  same  result  as  a 
transaction  in  long-time  bills  of  exchange  ;  because  the  rate  of 
exchange  on  India,  up  to  the  cessation  of  the  free  coinage  of 
silver,  followed  exactly  the  fluctuations  of  jjrice  in  the  silver 
market.      Let  us  suppose  a  case  in  which  the   protection   against 

'  Gold  and  Silver  Commission,  Question  2264. 


FLUCTUATIONS    OF    THE    EXCHANGES.  23 

the  exchanges  is  the  concern  of  the  European  manufacturer. 
Should  a  Manchester  cotton  spinner,  for  example,  accept  an 
order  in  January  1892,  for  cotton  yarn  to  be  delivered  at  Bom- 
bay, payable  on  July  I  in  rupees,  he  would  be  entirely  protected 
against  any  influence  arising  from  fluctuations  in  the  rate  of 
exchange  if  he  should  sell  a  corresponding  amount  of  bar-silver 
for  the  last  of  June  1892,  in  bianco,  at  the  quotation  of  the  day 
on  the  London  Exchange.  If  the  rate  of  exchange  falls  below 
this,  then  he  loses  on  his  goods-contract,  although  he  gains  by 
the  speculation  in  the  fall  of  silver ;  if  the  rate  of  exchange  rises, 
then  he  loses  on  silver,  but  gets  a  profit  on  the  delivery  of  the 
goods.  How  far  this  method,  however,  has  come  into  use  as  a 
protection  against  the  exchanges,  I  could  not,  as  already  men- 
tioned, learn. 

The  reverse  of  these  operations,  as  when  the  importer  into 
India  undertakes  to  cover  any  loss  from  exchange,  of  course, 
always  take  place  in  the  export  trade  ;  and  the  exporter  from 
India,  or  the  importer  into  England,  can  always  protect  himself 
by  time-dealings  in  bills  [Devise?i.]  or  in  bar-silver,  at  the  last 
moment  on  the  departure  of  the  ship  on  which  the  goods  bought 
or  sold  are  freighted. 

In  the  computations  the  cost  of  insurance  against  loss  by 
exchanges  is  as  exactly  worked  out  as  the  cost  of  marine 
insurance. 

The  condition  of  the  Indian  importer  occasionally  assumes 
an  unpleasant  phase,  if  he  is  obliged  to  wait  until  he  receives  the 
money  from  his  customers.  In  recent  years,  as  a  rule,  he  lost 
nothing,  for  the  price  of  silver  steadily  fell,  and  it  was  favorable 
to  him  ;  he  lost  nothing,  nay  he  could  even  gain  a  profit  by  the 
rise  in  the  prices  of  his  goods  caused  by  a  decline  in  the  rate  of 
exchange.  Only  in  1890  things  went  badly;  the  rate  of 
exchange  then  rose  high  ;  the  prices  of  European  goods  corre- 
spondingly fell,  and  the  dealers  who  had  to  sell  the  imported 
goods,  had  to  meet  the  loss.  The  native  merchants  of  Kurra- 
chee,  an  exceedingly  flourishing  seaport  at  the  mouth  of  the 
Indus,  because  the  firms  engaged  in  the  importation  of  cotton 


24  INDIAN    SILVER    CURRENCY. 

goods  lost  heavaly  in  1890  by  the  sudden  rise  of  exchange,  and 
the  exporters  of  grain  also  had  lost  heavily  by  the  fall  in  1891, 
resolved,  as  a  consequence,  in  1892  to  buy  no  more  European 
goods/ 

The  former  had  obtained  the  goods  when  the  exchanges  were 
low,  and  when  the  prices  of  goods  consequently  were  high  ;  then 
when  the  rate  of  exchange  rose  and  as  a  result  the  prices  of  cot- 
ton goods  fell,  they  had  to  face  the  danger  of  losing,  and  they 
tried  to  raise  prices  by  holding  back  their  goods.  The  specula- 
tion miscarried,  because  large  quantities  of  goods  came  from 
Bombay,  so  that  prices  could  not  be  kept  up. 

The  sudden  rise  of  exchange  in  1890  had  another  and  signifi- 
cant influence  on  the  trade  of  Kurrachee.^  A  great  wool  trade 
is  carried  on  in  this  city  ;  the  wool  is  brought  down  the  Indus 
from  Afghanistan  and  there  sold  to  dealers  who  cleanse  and  ship 
it.  As  a  result  of  the  rise  in  the  rate  of  exchange  in  1890  the 
price  of  wool  dropped  very  seriously  ;  then  the  Afghans  were 
told  that  it  was  the  rupee  that  was  at  fault.  The  honest  sons  of 
the  mountain  believed  that  the  Government  had  done  something 
[or  other]  wrong  to  the  rupee.  They  wrote  to  Afghanistan  not 
to  send  any  goods  until  the  sircar  or  Government  should  leave  the 
rupee  alone.  By  this  means  trade  was  very  sensibly  injured,  but 
because  the  rise  of  exchange  was  only  temporary,  it  soon 
resumed  its  normal  course  again. 

The  judgment  as  to  the  operation  of  the  fluctuations  of 
exchange  during  the  time  of  the  free  coinage  of  silver  which  the 
Herschell  Committee  states  in  section  25  of  its  report  is  impor- 
tant on  this  point :  "  It  is  said  that  legitimate  trade  is  replaced 
by  mere  speculation  and  gambling.  There  seems  to  be  a  com- 
mon agreement  amongst  those  who  differ  in  their  views  upon 
almost  all  other  points,  that  trade  is  seriously  harassed  by 
these  fluctuations,  though  the  estimates  do  not  all  agree  as  to  the 
character  and  the  extent  of  the  inconvenience  arising  from  this 
cause.     It  does  not  appear  to  be  certain,  even  in  the  view  of 

*  Minutes  of  the  Indian  Currency  Cominittee,  Questions  311  et  seq.,  and  also  p.  154- 
^  Ibid.,  Question  312. 


EFFECTS    OF    THE    FALL    IN    THE    VALUE    OF    SILVER.  2$ 

those  wlio  are  most  strongly  sensible  of  the  niischievous  effects 
of  fluctuations  of  exchange,  that  the  volume  of  trade  over  a 
series  of  years  has  been  diminished  from  this  cause,  though  there 
seems  a  common  agreement  that  any  sudden  or  violent  fluctuation 
almost  paralyzes  business  for  a  time.  It  is  to  be  observed  that 
it  is  not  so  much  the  fall  of  exchange  which  is  complained  of, 
as  the  fluctuations,  whether  in  one  direction  or  the  other.  Some 
of  those  who  admit  the  mischief  to  trade  of  exchange  fluctua- 
tions allege  that  the  extent  of  the  mischief  is  not  serious,  since 
provision  can  be  largely  made  against  the  effects  of  these  fluc- 
tuations through  the  medium  of  banks,  but  it  is  clear  that  the 
trades  cannot  completely  safeguard  themselves  in  this  way,  and 
that  such  security  as  they  obtain  in  this  respect  must  be  paid 
for.  It  must  be  remembered  that  before  the  fall  in  the  price  of 
silver  began,  and  the  fluctuations  in  the  rate  of  exchange 
dependent  upon  it,  the  rates  of  exchange  varied  very  consider- 
ably during  particular  years,  though,  no  doubt,  the  fluctuations 
have  been  much  more  frequent  and  considerable  since  that  time. 
"Upon  the  whole  it  cannot  be  doubted  it  would  be  well  if 
commerce  were  free  from  the  inconveniences  of  fluctuations  which 
arise  from  a  change  in  the  relation  between  the  standard  of 
value  in  India  and  in  countries  with  which  her  commerce  is 
transacted.  It  must  not  be  assumed  that  the  adoption  of  the 
same  standard  for  the  United  Kingdom  and  India  would  remove 
all  the  disquieting  causes  of  the  disturbance  of  trade  of  which 
complaint  is  made.  If  the  commodity  which  lies  behind  the 
exchange  transaction  is  one  that  continues  to  fall  in  relation  to 
gold,  the  risk  which  arises  from  bargains  in  a  falling  market  will 
still  be  present.  The  liability  of  the  standard  of  the  one  country 
to  fall,  in  relation  to  the  other,  causes,  however,  an  additional 
risk,  and  consequently  increased  disturbance  to  trade." 

§  II.       EFFECTS    OF    THE    FALL    IN    THE    VALUE    OF    SILVER. 
A.       EFFECT    ON    PRICES. 

Much  more  important,  however,  is  the  question,  how  the  fall 
in    the    price   of   silver  per  se   affected    not   only  trade,   but   the 


26 


INDIAN    SILVER    CURRENCY. 


industrial  and  agricultural  production  of  India.  The  question  is 
the  more  difficult  to  answer,  because  the  period,  in  which  the 
relation  between  gold  and  silver  changed  so  seriously,  witnessed 
a  complete  revolution  in  the  conditions  of  trade  in  the  country. 
In  1869  the  Suez  Canal  was  opened,  and  thereby  eastern  Asia 
was  first  brought  very  near  to  Europe.  Hand  in  hand  with  this 
came  an  increasing  tendency  to  replace  sailing  vessels  by  steam- 
ships. 


Steamships 

Total 

Year 

Entering 

Clearing 

Number 

Tonnage 

Number 

Tonnage 

Number 

Tonnage 

212 
686 
711 
1043 

234,782 
1,018,103 
1,152,440 
2,019,482 

208 

773 
934 
1268 

229,416 
1.115,769   1 
1,433,480    ' 
2,412,341 

420 
1459 
1645 
231 1 

464,198 

1880-81 

2,133.872 

1882-83 

2,585,920 

4.431,824 

Ships  of  All  Kinds. 


1882-83. 
1891-92. 


5864 
568b 


3,538,878 
4,308,375 


5851 
5472 


3,533,006 
4,282,276 


11,715 
11,158 


7,071,844 
8,590,651 


Not  less  important  is  the  increase  of  railways.  On  Decem- 
ber 31,  1870,  there  were  in  operation  4475  English  miles.  In 
1880  there  were  already  9308;  in  1890,  16,404,  and  on  March 
31,  1893,  18,042  miles.  The  annual  average  in  English  miles 
put  into  operation  in  1871-1880  was  453-3;  in  1881-1890, 
709.6;  from  January  i,  1891,  to  March  31,  1893,  728.  The 
increase  is,  therefore,  not  only  absolutely  very  large,  but  it  is 
also  an  extraordinary  progressive  rise.  As  a  matter  of  course  a 
revolution  is  thereby  created  in  the  domestic  trade  of  the  Indian 
penisula,  similar  to  that  caused  by  the  opening  of  the  Suez  Canal 
in  the  trade  with  Europe. 

Parallel  to  it  goes  a  considerable  reduction  in  the  rates  of 
freight  by  land  and  water.  In  a  publication  appearing  shortly 
before  his  death,  Das  Sviken  der  Warenpreise  ivähreiid  der  Letzten 
fünfzehn    Yahre  —  the    most    valuable    investigation    on     Indian 


EFFECTS    OF    THE    FALL    IN    THE    VALUE    OF    SILVER. 


27 


economics  which  1  have  met  with  in  German  literature, —  Nasse 
gives  the  following  figures  from  the  Statement  of  the  Trade  of 
British  hidia,  1887  : 


RATES     OF    FREIGHT    FOR     RICE     AND    WHEAT     FROM     CALCUTTA     TO 
LONDON    BY    STEAMSHIP    VIA    THE    CANAL. 


The  decrease  in  the  rates  of  freight  since  1870,  therefore, 
amounts  to  52.08  per  centum.  The  author  adds  the  following 
remarks:  "At  present  the  freight  from  Calcutta  to  London  on 
wheat  costs  24  per  centum,  and  that  on  rice  20  per  centum,  of 
the  price  in  Calcutta.  As  a  consequence  of  the  lowering  of 
freights  one-half  both  these  commodities  can  be  sold  on  the 
London  market  about  24  and  20  per  centum  cheaper  than  they 
were  in  1872.  The  freight  on  linseed  amounts  now  to  14  per 
centum,  on  jute  to  13  per  centum,  on  cotton  to  4. 50  per  centum, 
of  the  Calcutta  prices.  Hence,  the  cost  of  laying  down  in  Lon- 
don of  all  these  various  commodities,  which  constitute  the  most 
important  part  of  Indian  exports  of  merchandise,  have  been 
very  essentially  reduced  by  the  decline  in  ocean  freights." 

In  recent  years  the  reduction  of  freights  has  been  no  longer 
so    considerable.     The   following  statement   is  taken  from    the 


28 


INDIAN    SILVER    CURRENCY. 


reports  of  the  Imj)erial  Consulate  at  Madras  published  recently 
in  Volume  II.  of  the  Deutsches  Handelsarchiv  (the  ocean  freights 
from  Madras  to  English  ports  being  given  for  each  fifty  cubic 
feet): 


1889 
1890 
1891 
1892 


s. 

d. 

s. 

d. 

32 

6  to  45 

0 

37 

6 

'   40 

0 

37 

6 

'   45 

0 

37 

6 

'   4S 

0 

32 

6 

'   37 

6 

s. 

d. 

s. 

60 

0 

to  75 

70 

0 

SO 

0 

"   60 

57 

6 

62 

6 

"   67 

The  freight,  according  to  the  same  authorities,  on  grain 
amounted  for  each  20  cwt.  to  32s.  6d.;  rose  in  October  of  the 
same  year  to  45s.,  and  fell  in  the  second  half  of  the  year  1892 
to  22s.  6d.  The  charges  for  sugar  for  the  same  periods  were 
35s.,  45s.,  and  23s.  gd.  The  reduction  of  freight  on  the  two 
last  articles  is  much  more  considerable  than  that  on  cotton  and 
indigo.  But,  in  general,  the  downward  tendency  of  ocean 
freights  appears  in  recent  years,  with  the  exception  of  the  short 
time  of  depression  in  1889-91,  to  have  been  established. 

The  cost  of  inland  transportation  has  also  seriously  declined, 
to  which  the  completion  of  the  Indian  railway  system  has  chiefly 
contributed.  Thus  the  fertile  grain  districts  of  the  northern 
plains  of  India  have,  for  example,  direct  railway  connection  not 
only  with  Bombay  but  with  Calcutta.  Inasmuch  as  the  owners 
of  these  lines  are  different,  it  already  results  from  competition 
that  no  railway  charges  very  high  rates.  To  this  matter  the 
German  Consul-General  at  Bombay  drew  attention  as  early  as 
the  year  1881.'  Moreover,  one  ought  not  to  forget  the  follow- 
ing facts  :  India  is  a  possession  wholly  dependent  upon  England  ; 
there  is  either  state-ownership  of  railways,  or  they  have  a  state 
guarantee  of  interest.  If  a  deficit  exist  in  the  Indian  budget 
through  allowances  to  the  railways,  it  is  not  covered  by  Eng- 
land, although  the  advantages  of  cheap  freights  on  Indian  rail- 
ways accrue  to  the  English. 

'  Deulsches  HanJelsarc/iiv,  l88i,  II.  Bd.,  p.  408. 


EFFECTS    OF    THE    FALL    IN    THE    VALUE    OF    SILVER.  29 

In  addition  to  the  fall  in  freight  rates  is  the  increasing  elim- 
ination of  the  middleman.  This  was  a  standing  complaint  of 
the  English  merchants  heard  before  the  Royal  Commission  on 
the  Depression  of  Trade.  This  phenomenon  is  especially  felt  in 
India;  as  already  mentioned,  the  Anglo-Indian  merchant  has 
become  in  many  cases  only  a  simple  agent,  or  jobber,  between 
the  European  producer  and  the  Indian  dealer,  or  vice  versa. 

In  the  face  of  these  facts,  how  is  it  with  the  theory  that  the 
fall  in  the  standard  of  value  of  a  country  is  favorable  to  exporta- 
tion, but  unfavorable  to  importation  in  the  countries,  respec- 
tively,—  a  theory  which  found  many  defenders'  before  the 
Royal  Gold  and  Silver  Commission,  and  of  which  Herr  Professor 
Dr.  Friedberg  at  the  sitting  of  the  Prussian  House  of  Deputies 
on  January  25,  1894,  said:=^  "This  is  a  simple  axiom,  that  a 
depreciating  standard  necessarily  encourages  the  importation  of 
grain  [sc.  into  the  countries  having  a  gold  standard).  Gentle- 
men, the  proposition  that  a  cheapened  standard  serves  as  a  pro- 
tective tariff  for  the  country  concerned,  that  it  acts  as  an  incen- 
tive to  exports  and  discourages  imports,  is  so  far  undeniable  that 
if  anyone  doubts  it,  certainly  no  one  can  discuss  it  with  him." 
(Very  true!  Bravo!  from  the  right).  "  Indeed,  gentlemen,  it  is 
one  of  the  most  elementary  propositions  of  political  economy." 
This  is  the  somewhat  loud  repetition  of  an  argument  which 
Nasse  disproved  in  the  following  words,  simpler  certainly  than 
his  opponents:  "The  immediate  consequence  of  a  change  in  the 
relative  values  of  the  two  metals  is  a  corresponding  change  in  the 
relative  values  of  ( i )  the  money  circulating  in  countries  having  a 
silver  standard  to  (2)  that  circulating  in  countries  having  a  gold 
standard,  —  which  is  expressed  in  the  rate  of  exchange.  But  if 
the  standard  of  value  of  a  country  depreciates  in  comparison  with 
that  of  other  lands,  only  exported  and  imported  articles  will  first 
be  affected  in  their  relative  values  by  the  change.  The  rising 
rates  of  foreign  exchange  must  raise  their  i)rices.  The  relative 
prices  of  other  commodities,  however,  are  not  affected  for  a  con- 

'  Cf.  the  statements  of  Barclay,  Fielden,  Gibbs,  McLean,  Nicholson,  and  Tidman. 

'' Stenographic  Report,  1^.  \22. 


30  INDIAN    SILVER    CURRENCY. 

siderable  time  by  the  change  in  the  value  of  the  home,  as  com- 
pared with  the  foreign,  circulating  medium.  The  wages  of  labor, 
and  a  variety  of  conditions  affecting  the  prices  of  articles  of  daily 
use  are  only  gradually  changed.  The  further  result  follows  that 
for  a  time  the  production  and  the  exportation  of  exportable  articles 
obtains  an  increased  profit,  and  the  consumption  of  imported 
articles  that  have  become  relatively  dearer  is  diminished.  The 
fall  in  the  value  of  silver,  to  go  on,  has  made  it  possible  for 
countries  using  silver  to  offer  their  articles  of  export  on  the 
European  market  at  lower  prices  than  those  at  which  they  could 
formerly  furnish  them,  since  their  cost  of  production,  reckoned 
in  silver,  remained  unchanged  ;  on  the  other  hand  they  received 
by  sale  in  foreign  countries  payment  in  a  gold  medium,  which, 
in  consequence  of  the  change  in  the  relative  values  of  the  two 
metals  amounts  to  a  greater  quantity  of  silver  money  than  in  the 
earlier  period.  The  supply  of  articles  for  exportation  to  silver- 
using  countries  has,  therefore,  depressed  their  price  in  the 
world's  markets.  Vice  versa,  the  cessation  of  exportation  to 
silver-using  countries  must  exercise  a  certain  depressing  influence 
on  the  price  of  articles  of  export  in  the  gold-using  countries." 

It  then  became  possible,  through  this  shifting  of  prices,  for 
the  Indian  producer  to  extend  his  exports  at  the  expense  of  the 
producer  in  gold-using  countries,  but  the  importation  into  silver- 
using  countries  by  the  latter  [i.  e.,  gold-using  countries)  was 
thereby  rendered  exceedingly  difficult,  nay  often  impossible. 

In  order  to  establish  in  how  far  this  theory  applies  to  India 
we  shall  have  to  ascertain  how  Indian  prices  have  been  affected 
since  1870  ;  what  influence  the  fall  of  silver  has  had  on  the  shap- 
ing of  prices,  and  how  the  foreign  trade  of  the  country  especially 
has  been  affected. 

As  concerns  the  effect  on  prices,  it  would  certainly  be  a 
great  error  to  suppose  that  the  rates  of  exchange  had  remained 
especially  steady  in  former  times,  and  that  prices  had  undergone 
great  fluctuations  only  after  these  changes  had  come  about.  The 
opposite  is  correct.  Owing  to  the  completion  of  the  system  of 
railways,  as  well   as  the   opening  of  the  Suez    Canal,    the    possi- 


EFFECTS    OF    THE    FALL    IN    THE    VALUE    OF    SILVER.  3 1 

bility  of  (juickly  replenishing  stocks  of  gjods  imported  from 
Europe  in  case  of  necessit}'  has  allowed  the  working  of  domestic 
prices  to  go  on  much  more  regularly.  Taking  the  price  in 
January  1873  as  100,  the  quotations  of  gray  shirtings  fluctuated 
in  India,  in  1861-72,  between  215  and  93;  in  1881-92,  only 
between  84  and  74;  of  mule  twist.  No.  40,  in  1861-72, 
between  218  and  'j']  \  in  1881-92,  between  81  and  62;  and  of 
Doodiah  wheat,  in  1861-72,  between  130  and  59;  in  1881-92, 
between  103  and  72.  Such  differences  of  prices  in  the  same 
province,  as  are  found,  for  instance,  in  the  prices  of  wheat  in 
Bengal  in  1868,  are  today  wholly  impossible;  at  that  time  one 
rupee  exchanged  in  Patna  for  30.61  seers,'  while  in  Hazaribagh, 
situated  in  the  same  province,  the  famine  price  of  a  rupee  for 
3.77  seers  was  exacted,  or  nearly  eight  times  as  great  as  in 
Patna. 

Much  more  important  to  us  is  the  question  whether  the 
prices  of  Indian  goods  reckoned  in  silver  have  risen  or  fallen  in 
the  last  two  decades,  or  whether  they  have  remained  stationary. 
In  the  period  to  1886,  Nasse  was  able  to  establish  only  a  slight 
fall  in  the  prices  expressed  in  silver.  In  answer  to  the  question 
how  the  matter  stands  today,  Mr.  J.  E.  O'Conor,  the  admirable 
statistician  of  the  Indian  Government,  assistant  secretary  to  the 
Department  of  Finance  and  Commerce,  laid  before  the  Herschell 
Committee  a  short  statement  which  affords  satisfactory  informa- 
tion.^ Mr.  O'Conor  makes  use  of  the  method  of  index  numbers 
and  takes  the  price  of  March  1873,  as  lOO.  The  results  are 
shown  in  Table  I,  on  page  32  : 

The  articles  here  chosen  compose  about  one-third  of  the 
total  imports,  but  a  great  number  of  other  imported  articles  fol- 
lows their  price-movements.  Because  the  fluctuations  in  the  price 
of  "gray  shirtings"  influenced  the  changes  in  price  not  only  of 
unbleached,  but  also  of  bleached  and  colored  fabrics.  The  fluc- 
tuations in  the  price  of  iron  also  controlled  those  of  hardwares, 
machinery,    manufacturing     implements,    and    railway    supplies. 

'One  seer  =  2.057  English  pounds. 

'Appendix  to  Minutes,  pp.  161  et  seq.  • 


32 


INDIAN    SILVER    CURRENCY, 


These  selected  articles  are,  therefore,  to  be  regarded  as  the  rep- 
resentatives of  at  least  one-half  of  the  imports,  and  only  this 
part  of  the  imports  really  affects  the  great  mass  of  the  popula- 
tion. The  other  half  of  the  imports  consists  of  goods  which  are 
either  not  articles  of  necessity,  or  are  mainly  consumed  by  Euro- 
peans, or  are  used  in  such  small  quantities  that  they  play  no 
role  in  the  domestic  economy  of  the  people. 

TABLE     I.       WHOLESALE     PRICES     OF     IMPORTED     ARTICLES     AT    CAL- 
CUTTA. 


Period 

Gray  Shirtings 
8K  lbs. 

Mule  Twist, 
White,  No.  40 

Mule  Twist, 
Turkey  Red, 

No.  40 

Braziers' 
Copper 

Iron,  Flat, 
Bolt,  Bar 

1861-1865 

145 
128 
93 
79 
78 
80 
74 
74 

146 
122 
92 
83 

77 
71 
70 
64 

64 
69 
89 
67 
61 
62 
62 
64 

1866-1870 

1871-1875 

117 
104 
83 
62 

CI 

88 
92 
88 
78 

1876-1880 

1881-1885 

1886-1890. . . 

1891 

56                    72 

1892 

It  can  be  accepted  that  the  price  of  woolen  goods  reckoned 
in  rupees,  since  1873,  has  fallen  about  26  per  centum,  of  woolen 
yarns  about  36-43  per  centum,  of  iron  about  36  per  centum,  and 
of  copper  about  28  per  centum.      So  far  as  regards  imports. 

Mr.  O'Conor  remarks  on  these  figures:  "In  general  it  is  to  be 
said  that  —  with  the  exception  of  rice,  which  since  1887  shows  a 
marked  tendency  to  move  upward,  and  of  jute  —  all  the  impor- 
tant staple  articles  in  the  export  trade  have  either  not  risen  or 
have  fallen  in  price." 

This  might  be  a  matter  for  congratulation  to  us,  so  far  as  it 
concerns  articles  which  we  must  draw  from  the  tropics  and  in 
which  we  are  not  competing  in  India.  It  is  quite  a  different 
matter  in  the  case  of  wheat  and  spun  cotton,  but  of  these  later. 

It  would  be  a  very  great  error,  in  mv  opinion,  to  assign,  as 
has  frequently  been  done,  to  the  "appreciation  of  gold" — which 
is  so  often  asserted,  but  never  proved  —  the  stability  or  fall  of 
most  of  the  wholesale  prices  reckoned  in  silver.  First,  attention 
should  be  called  to  the  following  facts:    According  to  the  state- 


EFFECTS    OF    THE    FALL    IN    THE    VALUE    OF    SILVER. 


•33 


ments  ot  the  Economist  ("Commercial  History  and  Review"  for 
1873  and  1892)  the  price  of  Mule  Twist,  No.  40,  fair,  second 
quality,  on  March  i,  1873,  was  I5d.;  the  price  of  the  same 
article  in  January  1892,  was  8d.  The  price  therefore  has  fallen 
46.67  per  centum.  Accordins^  to  our  Table  I.  the  cheapening  of 
the  price  reckoned  in  silver  [in  India]  of  Mule  Twist,  white,  No. 
40,  between  March  1893  and  January  1892  was  36  per  centum. 
If  we  consider  the  changes  meanwhile  arising  from  the  relations 
of  gold  or  silver,  it  appears  that  the  price  of  cotton  yarn,  reck- 
oned in  gold  in  Calcutta  has  fallen  from  1873  to  1892  about  54 
per  centum.  That  the  downward  movement  of  prices  has  been 
more  violent  in  Calcutta  than  in  Manchester  becomes  clear,  in 
view  of  the  great  decline  in  the  cost  of  transportation  which  in 
the  last  twenty  years  has  affected  the  exports  of  English  cotton 
goods  to  India  by  a  reduction  of  freight  charges  and  the  like. 

TABLE    II.       WHOLESALE    PRICES    OF    ARTICLES    OF    EXPORT    AT    CAL- 
CUTTA, BOMBAY,  AND    RANGOON.       MARCH    1873=  100. 


Articles 

f 
1 

1 
00 

1 

87 
102 
100 
115 
"5 

84 
109 

85 

79 
104 

98 
128 
123 
100 
no 

io8 
96 

i 

I 

1 

S 

128 
104 
113 
87 

88 

82 

85 
90 
103 
88 
97 

95 
70 

112 
100 
114 
III 
120 

lOI 

108 
107 
104 
no 
103 
103 

102 
67 

86 

98 

n6 

148 

154 

97 

"3 

94 

108 

104 

103 

153 

144 

94 

94 

81 

83 

103 

96 

88 
100 

lOI 

104 

122 

126 

157 

84 

77 

95 

97 

132 

123 

105 

69 

77 

81 

no 

99 

90 

87 

93 

124 

134 

122 

151 

83 

94 

104 

104 

163 

153 

no 

54 

74 

77 

86 

81 

84 

81 

87 

147 

143 

133 

164 

87 

93 

97 

103 

126 

"5 

93 

50 

70 

77 

86 

65 

75 

89 

op'^'"  JMa£ :::::::::::;:: 

88 

162 

I6q 

156 

(  Ngakyiiok  (Rangoon) 

(  Calcutta                      

194 
103 

^^''^'^^^  \  lioml.av                           

n8 

f  Calcutta                      

n2 

Linseed  \  ,,   ^,_„ 

no 

(  Picked                                

2  36 

J"'^    ]  Ordinary                              

231 

132 

41 

65 

Cotton  Cloth,  44-inch,  24yds.,  8  lbs  .... 

77 
74 

66 

The  purchasing  power,  furthermore,  of  the  rupee   in  recent 
years  appears  to  have  measurably  fallen,  at  least  in  comparison 


34 


INDIAN    SILVER    CURRENCY. 


with  those  articles  which  are  not  objects  of  foreign  trade,  especially 
in  comparison  with  the  different  kinds  of  grain.  Mr.  O'Conor  has 
laid  before  the  Herschcll  committee  the  index  numbers  of  retail 
prices  of  the  most  important  cereals  in  the  principal  markets,  taken 
from  the  fourteen  daily  quotations  published  by  the  government. 
Make  allowance  for  the  fact  that  India  was  afflicted  with  two 
serious  famines,  between  1866  and  1870,  and  between  1876  and 
1S80: 

TABLE    III. 


Rice  (10). 
Wheat  (16). 
Jawar'  (15). 
Bajra'  (15). 
Ragi'  (  3). 
Gram  (10). 
Barley  (8). 


^ 

^ 

^ 

s 

£' 

1 

" 

M 

M 

.i 

vi 

§ 

S 

co" 

s 

1 

" 

" 

103 

130 

102 

140 

116 

135 

103 

133 

95 

127 

96 

117 

122 

140 

100 

146 

96 

122 

120 

131 

102 

147 

99 

122 

149 

185 

92 

209 

103 

103 

88 

149 

98 

130 

93 

114 

80 

108 

95 

"3 

90 

113 

149 
135 
138 

137 

138 

129 

131 


The  figures  in  parentheses  after  the  name  of  each  kind  of  grain  is  the  number  of 
markets  from  which  the  quotations  of  the  average  prices  are  reckoned. 

As  Mr.  O'Conor  remarks,  these  index  numbers  represent  the 
high  range  of  prices  for  each  kind  of  grain  in  the  districts  where 
they  are  produced  and  consumed  in  the  greatest  quantities. 

The  absolute  average  prices  in  Seers  per  rupee  are  as  follows  : 

TABLE    IV. 


Wheat  (99) 

Rice      (90) 

Jawar    (95) 

Barley  (54) 

Bajra     (86) 

Average  of  these 
kinds  of  grains. 


^ 

a 

K 

0 

^ 

I 

s 

ra 

<£■ 

^ 

g 

" 

" 

21.36 

15-45 

19.46 

16.35 

19-98 

21.66 

17.42 

19.14 

15-30 

18  21 

25.78 

21.25 

25-30 

20.42 

27.64 

35.60 

25.81 

28.54 

26.94 

30.48 

24.27 

19.90 

22.38 

18.91 

24.22 

25-73 

19.97 

22.96 

19.58 

24.11 

16.05 

15-41 

21.17 
24-25 
19.49 


14.05 
13-91 
18.44 

20.30 
16.57 


19.28      16.15 


'  Jawar  is  Yorghum  Vulgare ;  Yiz!)xz.,  Penisetum  TyphoiJeuvi ;  V^n^\,  Panicum  Mil- 
liaccum;  and  Gram  does  not  appear  as  an  export. 


EFFECTS    OF    THE    FALL    L\    THE    VALUE    OF    SILVER. 


35 


According  to  the  computations  of  the  Economist,^  on  the  basis 
of  the  Blue-book  on  Prices  and  Wages  in  India,  the  retail  prices 
in  rupees  per  cwt.  were  as  follows  : 

TABLE    V. 


Rice  . , 
Wheat 
Barley 
Jawar  . 
Bajra  , 
Gram . 


1871-1875 

I 876- I 880 

1881-1885 

1886-189O 

41.4 

47-3 

45-8 

55.6 

42.1 

51-7 

43-6 

52.7 

28.6 

31.8 

26.7 

33-4 

31.2 

41.4 

29.5 

38.4 

36.2 

46.6 

34-5 

32.7 

32.6 

38.1 

3..^ 

38.1 

62.0 

61.3 

40.0 
43-6 
48.6 
44.6 


A  report  to  the  secretary  of  state  for  India,  dated  October  5, 
1892,  No.  272,  signed  by  the  whole  Indian  ministry,  remarks 
upon  this  movement  of  prices  as  follows : 

"The  length  and  breadth  of  the  country  is  now  traversed  by 
railways,  and  numerous  steamship  connections  on  the  coast  fur- 
nish opportunities  for  exchange  of  goods,  all  of  which  twenty 
years  ago  did  not  exist.  Consequently  prices  can  never  sink  so 
low  as  formerly  in  times  of  superabundance,  when  the  demand 
was  merely  local  and  usually  less  than  the  supply,  and  when 
therefore  the  price  was  more  or  less  settled  by  tradition  and 
custom.  Today  there  are  relatively  few  districts  from  which 
grain  cannot  be  easily  taken  to  distant  regions,  where  the  supply 
is  less  than  the  demand,  or  even  to  foreign  lands.  The  oppor- 
tunities for  trade  are  today  so  multiplied  that  the  traders  will 
not  dispose  of  their  supplies  at  low  prices  in  a  local  market,  so 
long  as  they  know  they  can  obtain  higher  prices  if  they  export 
their  grain,  or  send  it  to  another  Indian  market.  Prices  are 
therefore  controlled  by  free  competition  and  by  a  steadily 
increasing  demand,  and  in  the  future  they  will  remain  at  a  higher 
level. 

"The  wholesale  prices  of  rice  and  wheat  —  the  only  two 
cereals  —  in  regard  to  which  exportation,  as  compared  with  local 
demand,  plays   a   considerable   ]:)art,  are  to  a  great   extent   influ- 

'  September  3,  1892,  p.  1120. 


36 


INDIAN    SILVER    CURRENCY. 


enced  by  the  prices  of  European  markets  expressed  in  gold  and 
by  the  temporary  movements  of  exchange."  [Not,  however,  the 
reverse!]  "As  concerns  the  retail  prices  of  breadstuffs  it  is  to 
be  remarked  that  in  the  last  three  or  four  years  loud  complaints 
have  been  continually  made  regarding  the  high  prices  of  those 
kinds  of  grain  which  serve  as  the  main  subsistence  of  the 
people." 

We  can,  however,  quietly  accept  the  fact  that  not  only  have 
the  changed  conditions  of  trade  raised  the  prices  of  grain,  but 
also  that  a  diminution  in  the  purchasing  power  of  the  rupee  has 
contributed  to  this.  This  diminution  in  the  purchasing  power  of 
the  rupee  has  already  extended  so  far  that  wages  have  risen  quite 
considerably  in  recent  years.  It  is  well  known  that  wages 
especially  follow  very  slowly  upon  a  change  in  the  purchasing 
power  of  money;  above  all,  of  course,  in  a  country  like  India  which 
is  so  much  under  the  control  of  tradition  and  custom.  Appendix 
II.  in  the  preliminary  report  of  the  Herschell  Committee  gives 
the  following  proof  of  this  : 


WAGES    IN    SKILLED    AND    UNSKILLED    LABOR    IN    RUPEES,    ETC. 
PER    MONTH. 


Year 

Able-bodied 

Agricultural 

Laborer 

Percentage 
IF  1873-1876 

BE  100 

Syce 

OR 

Groom 

Percent- 
age 

Common  Mason, 
Carpenter,  or 
Blacksmith 

Percent- 
age 

1873-76 
1877-81 
1882-86 
1887-91 

R.      A.        P. 
6       II           I 
6        7       II 

6  8        8 

7  I        8 

100 

96 

97-7 
106. 1 

R.   A.    P. 

6     7     3 
6     7     4 
6   II    II 
6   15     8 

100 
100 

104.5 
1 08. 1 

R.     A.      P. 
14      9        2 

14  II     II 

15  11      10 

16  14        5 

100 
I0I.2 

108 
116 

On  a  stationary  purchasing  power  of  silver  in  India  —  or  of 
an  appreciation  of  gold,  which  for  many  other  reasons  cannot  be 
accepted  —  one  would  hardly  lay  emphasis  in  view  of  the  fact 
that  wages,  in  spite  of  the  increase  in  jiopulation  by  fully  27.8 
millions'  from  1881  to  1891,  have  in  certain  callings  risen  quite 
considerably. 

^  Census  Report  of  1891,  p.  iii.  Of  course,  the  figures  of  population  of  1891  on 
which  the  above  comparison  is  made,  does  not  include  those  parts  of  tiie  country 
which  were  incorporated  into  the  Indian  Empire  only  after  188 1. 


EFFECTS    OF    THE    FALL    IN    THE    VALUE    OF    SILVER.  37 

Certainly,  what  has  just  been  said  about  the  movement  of 
prices  does  not  hold  true  for  that  portion  of  the  lowlands  where 
a  complete  state  of  barter  exists.  The  report  on  the  census  of 
1891  remarks  on  this  (p.  97):  "It  is  the  absence  of  all  competi- 
tion which  is  striking,  in  regard  to  all  the  non-agricultural  services 
rendered  to  the  village  community.  In  the  greatest  number  of 
cases  —  and  this  applies  undoubtedly  to  the  whole  of  India  where 
the  village  system  prevails  —  services  of  this  kind  arc  paid  for 
either  by  a  transfer  of  a  piece  of  village  land,  in  which  each  of 
these  lots  is  known  by  the  service  rendered,  or  by  a  fixed  amount 
of  grain,  etc.,  from  each  harvest,  for  which  amount  the  individual 
possessors  of  land  must  provide.  In  those  cases  in  which  cash  is 
paid,  the  price  is  apparently  ruled  rather  by  tradition,  which 
yields  but  slowly  to  change,  than  by  considerations  affecting  the 
value  in  the  open  market.  There  is  no  incentive  for  the  new 
people  to  be  progressive,  nor  to  underbid  the  old.  With  the 
improvement  of  the  means  of  communication  and  of  general 
security  on  the  roads,  perhaps  the  "higgling of  the  market"  —  to 
use  a  phrase  from  political  economy  —  has  found  its  way  into 
the  Indian  village;  but,  as  a  rule,  that  which  is  prepared  in  the 
village  itself  and  not  imported,  nor  brought  for  sale  to  the  inter- 
communal  market,  is  exempt  from  competition.  It  is  tradition, 
that,  as  in  the  days  of  Pindar,  governs  everything.' 

It  is,  however,  quite  another  matter,  if  we  turn  to  the  dealer 
in  imported  goods  and  to  those  who  do  not  belong  to  the  orig- 
inal organism  —  for  they  were  only  connected  with  the  life  of 
the  village  after  that  institution  ceased  to  exist  —  or  to  the  "out- 
siders,"   as    Sir    H.   Maine    expressed  it.       They    reallv    form    a 

'  "Das  ganz 
Gemeine  ist's,  das  ewig  Gestrige, 
Was  immer  war  und  immer  wiederkehrt, 
Und  morgen  gilt,  weil's  heute  hat  gegolten, 
Denn  aus  Gemeinem  ist  der  Mensch  gemacht 
Und  die  Gewohnheit  nennt  er  seine  Amme. 
******* 

Das  Jahr  übt  eine  heiligende  Kraft, 
Was  grau  vor  Alter  ist,  das  ist  ihm  göttlich." 
—  Cited  from  Schiller  in  the  Report  on  the  Population  of  East  India. 


38  INDIAN    SILVER    CURRENCY. 

market,  which  the  same  author  says  was  a  neutral  piece  of  land, 
so  destined  for  this  purpose  that  the  village  communities  situated 
around  it  and  shut  in  on  themselves  could  meet  there.  Now- 
adays, traders  of  this  sort  are  found  in  each  village,  and  to  the 
casual  observer  the  impression  is  given  that  they  stand  on  the 
same  basis  as  the  rest  of  the  community.  But  they  form  no 
organic  part  of  the  real  village  community,  and  on  the  occasion 
of  the  village  festivals  —  in  which  the  system  appears  very 
exclusive  —  they  have  no  well-established  place.  These  remarks 
apply  to  the  shop-keeper,  the  spice-dealer,  the  grain-trader,  the 
money-lender  (who  can  be  included  with  those  just  mentioned), 
and  to  the  tailor,  whose  labors  are  certainly  not  needed  by  the 
greatest  part  of  the  population,  except  in  the  north  where  the 
breech-cloth  and  the  sari  have  been  in  great  measure  supplanted 
by  trousers,  for  both  sexes.  All  these  are  in  the  village,  but  do 
not  belong  to  the  village.  Among  these,  therefore,  methods  of 
barter  no  longer  exist,  but  an  economic  monetary  system  prevails  ; 
they  form  the  free  market. 

B.      EXPORTATION    OF    WHEAT    FROM    INDIA. 

The  most  serious  question  for  Germany  is,  How  has  the 
exportation  of  wheat  from  India  been  modified  since  the  begin- 
ing  of  the  fall  of  silver  ?  As  to  that  it  can  be  laid  down,  in 
spite  of  all  the  claims  of  our  landed  interests,  and  in  spite  of  all 
Professor  Friedberg's  talk  about  axioms  and  the  most  elementary 
propositions  of  political  economy,  that  there  cannot  be  noted 
the  smallest  connection  between  the  exportation  of  wheat  from 
India  and  the  fluctuations  in  the  prices  of  silver  —  as  appears 
from  Table  VII.  (p.  39). 

It  might  be  of  interest  here  to  listen  to  the  views  regarding 
the  wheat  trade  of  a  most  competent  judge  of  the  relations 
involved,  the  oft-quoted  director  of  the  statistical  bureau  of  the 
Indian  Empire,  Mr.  J.  E.  O'Conor.  In  his  "  Review  of  the  Trade 
in  India  in  189 1-2  "  he  says  : ' 

"  Much  misapprehension  appears  still   to  exist   in    regard   to 

*  Economist,  "  Monthly  Trade  Supplement,"  October  15,  1892,  p.  10. 


EXPORTATION    OF    WHEAT. 


39 


the  conditions  which  have  permitted  the  deveh)i)nient  of  the  wheat 
trade  and  in  regard  to  the  progress  which  it  has  made.  It  may 
be  useful,  therefore,  to  recapitulate  the  facts  briefly.  They  are 
these  :  Until  the  opening  of  the  Suez  Canal  no  trade  in  wheat 
was  possible,  the  cost  and  duration  of  the  transit  around  the  Cape 
having  the  double  effect  of  making  Indian  wheat  too  dear  for  the 
European  market  and  of  spoiling  it  by  giving  weevils  time  to  do 
their  work  of  destruction.      After  the  opening  of  the  canal  it  was 


TABLE  VII.       EXPORTS    OF    WHEAT    FROM    INDIA. 


Year  Ending 
March  31 

QUANTHT 
(IN  1000  CWT.) 

Value 
(in  iooo  Rx.) 

Average  Rate 
OF  Exchange 

1877 

5,587 

6,373 

1,057 

2,202 

7,444 

19,901 

14,194 

21,001 

15,851 

21,009 

22,264 

13,538 

17,610 

13,799 

14.320 

30,303 

1,958 
2,874 
520 
1,124 
3,278 
8,870 
6,089 
8,896 
6,316 
8,005 
8,626 
5,562 
7,523 
5,791 
6,042 
14,380 

s.    d. 
I   8.51 

1878 

I   8.79 

1879 

I   7.79 

1880 

1881 

1882 

18S3 

I   7-96 
I   7.96 
I   7.89 
I   7-52 

1884 

I   7-54 

1885 

I   7.31 

1886 

1887 

18S8 

1   6.25 
1   5-44 
I   4.90 

1889 

i8qo 

1891 

•   1   4.38 
1   4.57 
I   6.09 

1892 

I   4-73 

discovered  that  there  was  still  an  impediment  to  the  trade  in  the 
existence  of  an  export  duty  of  three  annas  the  maund,  or,  say, 
about  five  rupees  the  ton.  On  the  representation  of  the  Bombay 
Chamber  of  Commerce  this  duty  was  removed  in  January,  1873. 
At  that  time  the  quantity  exported  was  only  394,000  cwt.,  but 
with  the  removal  of  the  duty  it  increased  until  it  exceeded  six 
millions  cwt.  in  1877.  The  greatest  [)art  of  the  exports,  how- 
ever, was  from  Calcutta,  for  Bombay  and  Kurrachee  were  not  yet 
linked  by  uninterrupted  railway  communication  with  the  vast 
wheat  fields  of  the  northwestern  jjrovinces  and  the  Punjab, 
whence  are  now  drawn  the  largest  part  of  the  supplies  available 

'Appendix   to  Minutes  of  Indian  the  Currency  Conwiittee,    p.    241.     Cf.    also    the 
graphic  representation  at  the  end  of  this  book. 


40  INDIAN    SILVER    CURRENCY. 

for  export.  Then  followed  the  great  famine  of  1877,  1878,  and 
1879,  raising  prices  in  India  to  a  level  that  interrupted  the  export 
business.  With  the  return  of  plenty,  a  reduction  of  prices,  the. 
completion  of  railway  communications,  and  consequently  the 
reduction  of  cost  of  transport,  trade  was  able  to  take  its  full 
development.  In  1 880-1  the  exports  were  still  under  7.50 
millions  cwt. ;  in  the  following  year  they  approached  20  millions. 
The  trade,  in  fact,  owing  to  the  circumstances  here  mentioned, 
really  began  only  in  188 1-2.  Since  then  there  has  been  no 
appreciable  development.  Until  1 890-1  the  exports  were  in 
three  of  these  years  only  somewhat  in  excess  of  those  of  188 1-2, 
while  in  six  of  these  years  they  were  much  below  them.  Last 
year's  exports  were  abnormal,  and  it  is  unlikely  that  such  circum- 
stances will  recur  soon.  Considering  the  whole  trade,  it  may  be 
said  that  the  average  quantity  of  wheat  which  Europe  will  take 
from  us  in  ordinary  times  is  not  quite  one  million  tons,  and  that 
we  have  not  on  the  whole  exceeded  that  quantity  since  we  first 
supplied  it  ten  years  ago." 

The  exceptionally  large  exportation  of  189 1-2  is  to  be 
ascribed  to  the  failure  in  the  harvests  in  Europe,  to  the  Russian 
interdict  on  the  exportation  of  grain,  and  to  the  resulting  rapid 
rise  of  price  on  the  European  corn  markets  ;  as  a  result,  it  was 
exceptionally  profitable  to  export  grain  from  India. 

It  is  to  be  seen  that  so  weighty  an  authorit}^  as  Mr.  O'Conor 
ascribes  the  exportation  of  wheat  simply  to  the  changed  condi- 
tions of  trade,  and  docs  not  devote  a  word  to  the  fall  in  the  price 
of  silver. 

Indian  wheat,  however,  is  today  landed  much  more  cheaply 
on  the  European  market  than  twenty  years  ago,  and  this  also  is 
to  be  ascribed  exclusively  to  the  changed  conditions  of  inter- 
course and  trade.  A  wholesale  merchant,  F.  Comber,  a  prom- 
inent figure  in  the  Anglo-Indian  trade,  made  definite  statements 
on  this  point  before  the  Royal  Gold  and  Silver  Commission.' 

The  difference  of  ocean  freights  is  not  (]uitc  so  great  here  as 
in  the  official  tables  given  on  page  27,  although  it  is  still  inipor- 

^  Second  Report,  p.  252. 


EXPORTATION    OF    WHEAT.  4 1 

tant  enough  to  exj)lain,  in  great  part,  the  fall  in  jirices  in  iMig- 
land.  Jubbul[)ore  was  already  connected  by  railway  with  Bombay 
in  1873  ;  but  the  cheapening  of  inland  transportation  is  not  there- 
fore alone  due  to  the  fact  that  the  corn  district  in  question  had 
only  been  opened  to  the  markets  of  the  world  from  about  that 
time;  and  the  fall  in  freights  expressed  in  English  gold  is  partly 
to  be  explained  by  the  fall  in  the  price  of  silver.  No  regard  has 
been  given  to  the  transportation  from   the  places   of   production 


TABLE  VIII.     COST  OF  TRANSPORT  OF  WHEAT  FROM   INTERIOR   DEPOTS 
IN  INDIA  AND  AMERICA  TO  UNITED  KINGDOM,  PER  QUARTER. 


if 

|3 

5;.S 
< 

Cost  of  Carriage 
Indian  Wheat 

Cost  of  Carriage 
American  Wheat 

Reduction  Compared 

WITH  1873  IN 

Year 

Is 

P 

ll 

1 
1 

3° 

2e 

II 
si 

1 

1 

1 
0 

B 
2 

2 

e 
2  „ 

1873 

s.  d. 

58  8 

s.  d. 
9  8 

s.  d. 
13  0 

s.  d. 
22   8 

s.  d. 
6  5 

s.  d. 
7  0 

s.  d. 
13  5 

s.  d. 

s.  d 

s.  d. 

1874 
1875 
1876 
1877 

55  9 

45  2 

46  2 

56  9 

9  7 
6  10 
6  6 
6  7 

II  II 
11  4 
10  6 
9  2 

21   6 

18   2 

17  0 
15  9 

4  8 
3  10 
3  2 
3  9 

6  6 
6  0 
5  6 
4  ID 

II  2 
9  10 

8  8 
8  7 

2  II 
13  6 
12  b 

I  II 

4  6 

5  8 

6  II 

2  3 

3  7 

4  9 
4  10 

Average  of  4  years 

51  0 

7  4 

ID   9 

18  I 

3.0 

5  8 

9  6 

7  8 

4  7 

3  II 

•1878 
1879 
1880 
1881 
1882 

46  5 
4310 

44  4 

45  4 
45  I 

6  3 
6  4 
6  4 
6  4 
6  5 

4  10 
6  3 

8  I 

9  2 
6  10 

11  I 

12  7 

14  5 

15  6 

13  3 

3  I 

3  10 

4  I 
2  9 
2  8 

5  0 
4  2 
3  10 
2  10 
2  7 

8  I 
8  0 
7  II 
5  7 
5  3 

12  3 
14  10 
14  4 

13  4 
13  7 

II  7 
10  I 

8  3 
7  2 

9  3 

5  4 
5  5 
5  6 

7  10 

8  2 

Average  of  5  years 

45  0 

6  4 

7  0 

13  4 

3  3 

3  8 

6  II 

13  8 

9  3 

6  6 

1883 
1884 
1885 
1886 

41  7 
35  8 

32  10 
31  0 

33  1 1 

5  8 
5  7 
5  4 
5  I 

4  II 

6  2 
4  3 

4  TO 

3  10 

4  6 

II  10 
9  10 
10  2 

8  II 

9  5 

2  10 
2  2 

1  II 

2  II 

2  9 

2  8 
2  4 
2  2 
2  2 

I  8 

5  6 
4  6 

4  I 

5  I 

4  5 

17  I 

23  0 
25  10 
27  8 

24  9 

10  10 
12  10 

12  6 

13  9 
13  3 

7  " 

8  II 

9  4 

8  4 

9  0 

Average  of  4>^  years 

350 

5  I 

4  9 

10  I 

2  6 

2  2 

4  8 

23  8 

II  7 

8  9 

'This  does  not  include  cost  of  transport  from   the    producing   districts   to  Jubbul- 
pore  and  Chicago. 


42  INDIAN    SILVER    CURRENCY. 

to  Jubbulpore,  which  has  been  very  essentially  cheapened  by  the 
building  of  roads,  railways,  and  canals. 

In  addition,  there  is  a  very  admirable  organization  of  the 
export  trade  in  grain.  The  great  English  firms  have  their  offices 
at  the  principal  markets  in  the  interior  of  the  great  empire,  and 
when  the  merchant  cables  from  the  Metropolitan  Corn  Exchange 
in  Mark  Lane  the  quotations  of  wheat  to  his  agent  at  Jubbulpore  or 
Cawnpore,  this  agent,  on  the  basis  of  the  railway  and  ocean  freights 
as  well  as  of  the  rates  of  exchange,  can  immediately  compute 
how  much  he  ought  to  pay  the  Zamindar. 

By  this  centralization  of  the  wholesale  trade  expenses  are 
naturally  largely  reduced.  If  attention  be  further  drawn 
to  the  fact  that  transportation  from  the  places  of  production  to 
the  grain  markets  of  the  interior  has  been  made  very  much  easier 
and  cheaper  by  roads,  railways,  and  canals,  and  that  the 
grain  districts  of  the  valleys  in  northern  India  are  now  all  con- 
nected with  the  sea,  it  is  nonsense  to  ascribe  the  falling  or 
stationary  wholesale  prices  of  wheat  to  the  fall  in  the  value  of 
silver  either  alone  or  in  great  part.  If  we  compare  the  retail 
prices  of  wheat  given  in  our  Tables  III,  IV,  and  V,  with  those  of 
the  wholesale  prices  contained  in  Table  II,  and  note  how  the  latter 
have  remained  stationär)'  while,  on  the  contrary,  the  former  have 
risen  very  considerably,  it  is  impossible  to  find  any  other  explana- 
tion for  this  than  the  cheapened  cost  of  movement  to  the  grain 
markets  and  the  significant  reduction  of  expenses  in  the  wholesale 
trade. 

A  genuine  creation  of  myths  has  apjjcarcd  in  connection  with 
the  exports  of  wheat  from  India.  Dr.  Arendt,  for  example, 
claims  in  his  Leitfadeti  der  lVähru?igs- Frage,  p.  31  :  The  English 
agriculturist  was  not  able  to  protect  himself  without  customs 
duties  against  the  agricultural  competition  of  India;  and,  hence, 
already  more  than  one-half  of  the  English  area  is  today  out  of 
cultivation.  This  last  statement  is  pre-eminently  false.  The 
whole  superficies  of  England  amounts  to  77,642,099  acres  ;  in 
which,  however,  are  comprised  the  numerous  waterways  partic- 
ularly   in    England,  as  well   as  extensive   districts  in   Scotland 


EXPORTATION    Ob'    WHEAT.  43 

which  liad  been  turned  into  shcej)  pastures  in  the  hist  century  in 
consequence  of  the  sad  events  following  the  battle  of  Culloden, 
and  which  have  later  gone  entirely  out  of  cultivation.  Of  the 
above,  there  were,  in  1892,  47,977,903  acres  in  cultivation,  being 
61.8  per  centum  of  the  whole  area  under  culture  ;  while  in  1871-75 
there  were  only  46,984,106  acres.'  Since  the  appearance 
of  Indian  competition,  therefore,  the  cultivated  area  has  even 
increased.  On  the  other  hand,  it  is  true  that  in  consecjuencc  of 
international  competition  the  acreage  chiefly  planted  in  wheat  as 
well  as  in  other  cereals  has  steadily  declined  since  1871-75. 
While,  in  1871-75,  3,737,140  acres  were  planted  in  wheat,  and 
11,543,577  acres  in  other  cereals;  in  1892  the  figures  were, 
respectively,  2,298,607  and  9,328,701  acres.  Furthermore,  the 
income  from  land  deduced  from  the  schedules  of  the  income  tax 
has  fallen  from  1877  to  1892  from  ^^69, 438, 632  to  ;^57,39i,846, 
undoubtedly  in  consequence  of  international  competitipn.  There 
were,  from  1877  to  1892,  1225.19  millions  cwt.  of  wheat  and 
wheat-flour  imported  into  the  United  Kingdom,  of  which 
120.79  millions  cwt.,  or  9.86  per  centum,  were  imported  from 
India." 

It  would  now  be  exceedingly  interesting  to  learn  from  Dr. 
Arendt  on  what  ground  he  concludes  that  it  is  precise!}'  the  9.86 
per  centum,  and  not  the  other  90.14  per  centum,  of  wheat  imports 
— since  as  regards  wheat  we  are  here  concerned  solely  with  Indian 
competition  —  which  has  injured  the  English  producers  of  grain. 
Or  is  he,  perhaps,  putting  forth  a  theory  of  "marginal  losses"  on 
the  analogy  of  marginal   utilities  ? 

But  another  main  argument,  also,  of  our  bimetallistic  agrarians 
is  good  for  nothing — the  argument  that  it  is  impossible  for  our 
agricultural  interests  to  compete  with  the  grain  from  silver-using 
countries,  because  it  receives  a  premium  on  export  due  to  the  fall 
in  the  value  of  silver.      India  being  the   only  silver  country  from 

'  All  these  figures  are  taken  from  the  Agricultiiral  Returns  for  Great  Britain, 
1892. 

="  These  figures  are  taken  from  the  Statistieal  Abstracts  for  the  United  Kingdom 
1877-91  and  1878-92. 


44 


INDIAN    SILVER    CURRENCY 


which  Europe  draws  grain  —  in  foreign  trade  America  and 
Roumania  pay  gold,  Russia,  Austria-Hungary,  and  the  La  Plata 
states  as  yet  have  solely  a  paper,  not  a  silver  standard  —  it  is 
exactly  in  India  where  we  see  that  ( i )  the  fall  in  the  price  of  silver 
has  not  had  the  slightest  influence  upon  the  exports  of  wheat ; 
that  (2)  rather  the  purchasing  power  of  the  rupee  in  recent  years 
as  compared  with  grain  has  declined  quite  considerably  (and  in 
reality  fell  similarly  with  the  quotations  of  silver);  that  (3)  the 
cheapening  of  Indian  grain  on  the  European  market  is  to  be 
ascribed  to  the  improvement  and  the  cheapening  of  means  of 
communication,  as  well  as  of  abetter  organization  of  trade;  and 
finally  that  (4)  India  does  not  control  the  price  of  grain  on  the 
European  market,  —  but,  quite  the  reverse,  grain  is  only  exported 
from  India  when  the  character  of  the  Indian  harvests  and  the 
European  quotations  of  prices  make  it  profitable. 

C.  THE  COTTON  INDUSTRY. 

To  England  by  far  the  most  important  part  of  the  trade  with 
India  is  in  cotton  goods.  To  be  sure,  it  is  no  longer  as  it  was  up 
to  the  seventies  when  more  than  one-half  of  the  whole  Indian 
imports  consisted  of  English  cotton  goods  ;  but  even  yet  fully 
41  per  centum  of  the  total  imports  into  India  in  189 1-2  were 
products  of  the  Lancashire  industries.  About  300  millions  rupees 
of  English  cotton  goods  have  been  on  the  average  imported 
into    India    each    year    since    1886.        Mr.     O'Conor     calls     the 

EXPORTS  OF  COTTON  YARN  AND  COTTON  CLOTHS  TO  INDIA 
AND  EASTERN  ASIA. 


Yarn  in  Millions  of  English  Lbs. 


Total 
Exports 


To  China,  Japan, 
Straits,  etc. 


1887 
1889 
1890 
189I 
1892 


l.bs. 
251 .0 
252.3 
258.4 
245.5 
233 -2 


Lbs. 
51-5 
48.6 
52.5 

53-2 
42.1 


Per  Cent. 
20.52 
19.26 
20.32 
21.67 
18.05 


Lbs. 
35-3 
35-7 
38.1 
28.0 
31-9 


Per  Cent. 
14.06 
14.15 
1475 
I  I  .40 
13.68 


COTTON    INDUSTRY 


45 


Cloth  in  Millions  of  Yards 

Year 

Total 
Exports 

To  India 

To  China,  Japan, 
Straits,  etc. 

1887 

Yds. 
4904.0 
5001.5 
5124.2 
4912.6 
4873-3 

Yds. 
1973-4 
2138.7 
2189.6 
1964.8 
1974-6 

Per  Cent. 

40.24 
42.76 
42.73 
40.00 
40.52 

Yds. 
763.0 
759.2 
806.7 
823.2 
779-6 

Per  Cent. 
15-56 
15.18 
15-74 
16.76 
15-99 

1889  .         .  .                    

1890  .         .  .                    

1891  .         .  .           

1892 

importation  of  cotton  goods  the  backbone  of  the  Indian  imports; 
and,  similarly,  it  can  be  said  that  this  importation,  together  with 
that  to  the  rest  of  eastern  Asia,  is  the  backbone  of  the  exports 
from  Lancashire.     This  is  shown  by  the  above  tables. 

For  some  years  the  English  cotton  manufacturers  have  com- 
plained of  the  excessive  losses  caused  by  the  fall  of  the  price  of 
silver  to  their  exports  to  Eastern  Asia.  Without  doubt  the 
prices  of  their  manufactures  have  heavily  fallen,  as  the  following 
extract  from  the  Eco7iomist  tables  of  prices  shows  : 


Year 

Mule  No.  40 
Fair  2d  Quality 

Gold  End  Shirtings 
40  in.  66  Reeds 

375^  yds. 
8  lbs.  12  oz. 

1873  January  i                                          

d. 
15 
11;^ 

914- 

83/8 
7 

8X 

s.        d. 

II     3 
9   loK 
7   loK 
7     4 
7      0« 

7   loK 

1877        •'          I                                         

1883        "          I                                              

1887         "          I 

1892   September  i                                          

Yet,  according  to  the  statements  of  the  Economist,  the  profits 
of  the  spinning  mills  were  not  bad.  It  gives  the  following  figures 
for  the  largest  stock  companies  (see  next  page) : 

The  bad  results  of  the  two  last  years  are  explained,  according 
to  the  statements  of  the  Economist,  by  the  fact  that  in  1891,  in 
expectation  of  a  small  crop  of  cotton  in  America,  the  manu- 
facturers laid  in  their  raw  material  at  high  prices  ;  but  when  the 
crops  turned  out  unexpectedly  good,  the  price  of  cotton  as  a 
consequence  fell  excessively,  and  the  manufacturers  found  they 

'  Lowest  point. 


46 


INDIAN    SILVER    CURRENCY. 


Year 

Number  of 
Factories 

For  Each 
Factory 

1892 

90 

93 
go 
86 

1-oss 101,434 

Gain 10,763 

"     376,041 

"     220,587 

"     250,932 

"     85,810 

Loss 61,718 

"     2,730 

Gain 125,000 

i. 
II27 

"5 

4178 

2565 

2952 

975 

615 

31 

2083 

1891 

1890 

1889 

1888 

85 
88 

go 

87 

60 

1887 

1886 

1885 

1884 

had  made  a  serious  mistake.  In  1892  took  place  the  greatest 
stoppage  of  labor  which  had  ever  been  seen  in  Lancashire  — 
first,  the  Stalybridge  lock-out,  which  brought  to  a  standstill  for 
three  weeks  18  million  spindles,  and  then  the  great  strike  which 
lasted  from  November  7,  1892,  to  March  1893,  during  which 
time  15  million  spindles  were  idle.  In  1892  something  more 
than  y^  of  one  per  cent,  was  earned  on  the  large  working  capital  of 
the  factories  just  mentioned  (^^3, 629, 078  of  capital  stock,  includ- 
ing on  the  average ^^3,44 1 ,028  loans  bearing  4 y^  per  cent,  interest) . 
In  1 891  there  was  paid  an  average  dividend  on  the  capital  stock 
of  6s.  per  £\(^o\  in  1890,  of  ;^  10  i8s.;  in  1889,  of  ;^6  12s.  6d.; 
and  in  1888,  £'j  8s.  3d.  It  is  to  be  seen  from  this  that  the 
Lancashire  industries  can  subsist  in  spite  of  the  lowered  value  of 
silver,  and  notwithstanding  the  fact  that  one-half  their  exports 
go  to  silver-using  countries ;  although  I  will  not  wholly  deny 
that  a  higher  rate  for  silver  would  be  very  much  more  favorable 
for  them,  and  that,  as  formerly  mentioned,  they  suffer  severely 
from  violent  fluctuations  of  the  exchanges.  This  industry  with 
its  exceptionally  large  capital  has  been,  to  the  present  time,  pre- 
cisely in  the  condition  to  make  up  every  fall  of  price,  to  a  certain 
extent,  by  improvements  in  processes,  and  by  larger  investments 
of  capital. 

And,  in  the  main,  it  was  not  the  fall  in  the  price  of  silver  which 
drove  the  English  cotton  manufacturers  into  the  bimetallic 
camp ;  it  was,  for  the  most  part,  rather  the  fear  of  the  extremely 
flourishing  industry  in  India  which  was  competing  against  them, 
and  whose  immense  progress  was  ascribed  to  the   fall  in  silver 


COTTON    INDUSTRY, 


47 


acting  as  a  protective  tariff.  And,  in  reality,  there  is  every 
reason  for  Lancashire  to  look  with  anxiety  on  the  spinning  and 
cotton-cloth  mills  at  Bombay,  whose  growth  is  truly  astonishing. 


INDIAN    COTTON    INDUSTRY. 


1876-77 
1880-81 
1 884-8  "5 
1887-88 
1888-89 
1889-90 
1890-91 
1891-92 


47 
58 
81 
97 
108 
114 
125 
127 


Spindles 


1,100,112 
1,471.730 
2.037.055 

2,375,739 
2,670,022 

2,934,637 
3,197,740 
3,272,988 


9,139 
13,283 
16,455 
18,840 

22,156 
22,078 

23.845 

24,670 


Yarn  (in         Cloth  (in 
1000  lbs.)        1000  yds.) 


7,927 
26,901 
65,897 
113,451 
128,907 
141,950 
169,275 
161,253 


15,544 
30,424 
47,909 
69,486 
70,265 
59,496 
67,666 
73,384 


EXPORT    OF    COTTON    YARN    AND    COTTON    GOODS    FROM    THE    UNITED 
KINGDOM    TO    CHINA,    HONG    KONG    AND    JAPAN.' 


Year 

Yarn 
in  1000  lbs. 

Cloth 
in  1000  yds. 

33,086 
46,426 
38,856 
35,354 
44,643 
35,720 
37,869 
27,971 

394,484 

1880                                       

509,099 

1884                                                   

439,937 

1887                                                    

618,146 

1888                                                         

652,404 

1889                                              

557,004 

633,606 

595,258 

Indian  spinning  mills  have,  in  particular,  grown  rapidly  in  the 
last  I  5  years,  and  they  have  entirely  beaten  the  English  on  the 
Eastern  Asiatic  market ;  on  the  other  hand,  England  still  entirely 
controls  Eastern  Asia  in  cotton  cloth.  These  facts  affords  us 
efficient  guidance  as  to  where  we  have  to  search  for  the  reasons 
why  the  Indian  cotton  industry  has  shot  up  so  extraordinarily. 

The  manufacturers  of  Lancashire  claim,  as  already  mentioned 
that   the   fall  of  silver   is   solely  responsible  for   it.     Mr.  J.  C 

'  These  tables,  taken  from  the  Appendix  to  the  Minutes  of  Indian  Currency  Com- 
mittee, p.  244,  do  not  wholly  agree  with  those  of  the  Economist,  because  the  latter 
includes  Java,  Straits  Settlements,  etc. 


Rs. 

s.            d. 

39-84     - 

=     79     8X 

26.63     = 

=     53     3^ 

Rs. 

s.         d. 

39-84     - 

=      59     9X 

26.63      -- 

=     39   iiK 

48  INDIAN    SILVER    CURRENCY. 

Fielden,  a  prominent  leader  of  the  Manchester  bimetallists,  tried 

to  explain   the  phenomenon  before  the   Royal  Gold  and  Silver 

Commission,'   as   follows:    At   the  end  of    1885    good    DhoUera 

cotton  cost  on  the  Bombay  market  180  rupees  per  candy  of  784 

pounds.     At  the  same  time  yarn  20's  cost  at  Bombay  6^  annas 

per  pound.      If  it   is   reckoned   that  116  pounds  of  raw  cotton  is 

used   to   make    lOO   pounds   of  yarn,  the   following    results   are 

reached  : 

(i)  Exchange,  2S.  Per  Rupee. 

For  100  lbs.  yarn  is  received    -  -  -  - 

116  lbs.  raw  cotton  costs     -  -  -  - 

Leaving  for  the  spinner     -  -  -  -13. 21      =     26     5 

=  3. 1  yd.  per  lb. 
(2)  Exchange,  is.  6d.  per  rupee. 

For  100  lbs.  yarn  is  received    - 

116  lbs.  rawr  cotton  costs     -  -  - 

Leaving  for  the  spinner     -  -  -  -     13.21      =      19     g^ 

=  2.47d.  per  lb. 

Mr.  Fielden  now  says,  furthermore,  that  the  Lancashire  spinner 
cannot  produce  under  2-2  ^^^d.  per  pound.  But  the  freight  is 
^d.;  consequently,  at  a  rate  of  2s.  to  the  rupee  he  makes  a  fair 
profit,  while  at  a  rate  of  is.  6d.  he  is  no  longer  able  to  compete 
with  the  Indian. 

At  first  sight  this  argument  has  about  it  something  very 
taking,  but  on  going  to  the  bottom  of  the  matter  one  finds  much 
to  suspect.  Apart  from  the  fact  that  the  rupee  has  never,  in  the 
last  30  years,  reached  a  rate  of  2s. —  this  rate  especially  at  the 
present  time  being  unattainable  —  it  seems  as  if  the  freight  was 
set  somewhat  low  at  ^d.  When  cotton  in  Bombay  costs  180 
rupees  per  candy,  in  Manchester  it  costs  considerably  more.  The 
Lancashire  spinner  has  still  to  pay  for  the  pressing  of  the  cotton 
in  India,  ocean  freight  to  Liverpool,  insurance,  commission  to  the 
broker  on  the  cotton  exchange,  insurance  against  rates  of 
exchange,  and   railway    transportation    from   Liverpool  to  Man- 

•  Second  Report,  p.  129. 


COTTON    INDUSTRY.  49 

ehester.  Then  lie  has  to  pack  the  cotton  yarn  when  ready,  and 
provide  for  freight,  insurance,  etc.  And  can  all  this  be  done  for 
^d.  per  pound?  Mr.  Comber,  himself  the  head  of  a  house 
engaged  in  the  trade  between  Lancashire  and  India  —  whose 
interesting  testimony  before  the  Gold  and  Silver  Commission 
will  be  presently  discussed  —  gives  the  expenses  of  transportation 
as  i.igd.  If  we  take  the  average  between  the  statements  of 
Messrs.  Comber  and  Fielden,  and  reckon  the  cost  of  freight  at 
about  id.,  then  the  Lancashire  spinner,  at  a  rate  of  2s.  to  the 
rupee,  would  just  about  cover  his  cost;  at  a  rate  of  is.  lo^^cl- 
(the  quotation  corresponding  to  the  ratio  of  i  :  151^)  he  would 
have  a  small  loss.  But  there  is  yet  an  additional  consideration. 
Mr.  Fielden,  in  his  computation,  starts  from  prices  as  they  were 
at  a  time  when  the  rate  was  is.  6d.;  but  at  a  rate  of  2s.  the  Indian 
spinner  could  also  work  more  cheaply;  his  manufacturing  plant 
would  stand  him  considerably  less  ;  for  interest  and  sinking-fund 
on  the  capital  contributed  in  gold  he  would  have  to  produce 
much  less  ;  he  would  obtain  his  coal,  which  he  has  to  bring  from 
England,  cheaper;  he  would  undoubtedly  hire  his  European 
employees  at  lower  salaries  ;  and,  in  short,  he  could  save  largely  in 
expenses.  It  cannot  possibly  be  proved  by  Mr.  Fielden's  figures 
that  it  was  the  fall  in  the  price  of  silver  which  made  competition 
with  Bombay  impossible  for  the  English  cotton  spinners. 

As  opposed  to  this  idea  let  us  note  the  statement  of  Mr. 
Comber,  the  one  frequently  referred  to  previously,  before  the  Gold 
and  Silver  Commission.'  He  says  (Question  8220):  "I  quite 
disagree  with  the  opinion  that  the  large  development  of  the 
cotton  industry  in  India  is  due  entirely,  or  even  chiefly  to  the 
fall  in  silver.  I  desire  to  say  that,  on  the  contrary,  the  Indian 
mills  derive  only  a  trifling  and  temporary  benefit  from  the  changed 
relations  between  gold  and  silver,  and  that  their  remarkable 
development  of  late  years  is  due  chiefly  to  other  and  natural 
advantages  which  the  Indian  spinner  enjoys  over  his  Lancashire 
competitor  in  the  production,  not  of  all  kinds  of  yarn,  but  of 
those  descriptions  which  can  be  made  from  Surat  cotton,  that  is 
^Second  Report,  pp.  141  f/  seq. 


50 


INDIAN    SILVER    CURRENCY 


Indian  cotton.  Before  entering  into  details,  I  may  state  broadly 
that  these  advantages  arise  principally  from  the  Indian  spinners' 
proximity  to  the  place  where  (i)  the  cotton  he  uses  is  grown, 
and  (2)  the  yarn  he  spins  is  consumed." 

Mr.  Comber  then  proceeds  to  explain  that  a  readjustment 
similar  to  that  which  is  going  on  between  Lancashire  and  India 
is  showing  itself  in  the  United  States.  Here  the  cotton  industry 
is  moving  more  and  more  from  the  North  to  the  cotton-producing 
states  of  the  South,  in  spite  of  the  fact  that  both  the  North  and 
South  possess  the  same  currency  and  even  the  same  high  pro- 
tective tariff  system.'     He  gives  the  following  tables  : 


Southern  States  of  Union 

India 

Spindles 

Looms 

Spindles 

Looms 

1886-7     

1,213.346 
579,320 

27,963 
12,329 

2,421,290 
1,461,590 

18,536 
13,502 

1879-80         ... 

654,026 
117 

15,634 
127 

959,700 
65% 

5,034 

CONSUMPTION    OF    RAW    COTTON. 
COTTON    DELIVERED    TO    MILLS,    IN    THOUSANDS    OF    BALES. 


,886-7 

i88c^8i 

Increase 

Increase 
per  centum 

Northern  States 

1727 
398 
726 

1710 
205 
379 

17 
193 
347 

94 
91 

India    

And,  as  in  India,  it  is  distinctlv  the  coarser  grades  which  are 
produced  in  the  southern  states  of  the  North  American  republic. 

Another  statement  laid  before  the  Commission  by  the  same 
authority  is  very  interesting,  because  it  clearly  shows  that  it  is 

• "  As  the  Northern  mills  enjoy  equally  with  the  Southern  the  advantaj:fe  of  pro- 
tective duties,  and  have  increased  during  the  six  years  to  so  small  an  extent,  it  is  clear 
that  the  development  of  the  Southern  mills  is  not  due  to  protection,  but  to  the  advan- 
tage which  they  possess  in  common  with  the  Indian  mills,  viz.,  proximity  to  the  areas 
of  production  of  raw  and  consumption  of  manufactured  cotton." — Comber,  j^/</.,  p.  141. 


COTTON    INDUSTRY. 


51 


chiefly  the  difference  in  cost  of  transportation  which  has  favored 
the  Indian  cotton  industry  as  against  the  English.  Althougli 
Mr.  Comber  is  in  the  very  center  of  the  trade  between  Lanca- 
shire and  India,  and  is  thereby  so  much  the  more  trustworthy, 
yet  in  spite  of  this  he  does  not  believe  —  as  do  most  of  those 
having  interests  in  Manchester,  who  hope  by  changes  in  currency 
legislation  to  bring  ruin  upon  their  Indian  competitors  —  that 
he  should  ascribe  the  cause  of  the  prosperity  of  this  annoying 
spinning  industry  of  India  to  the  fall  in  silver,  without  a  further 
examination,  or  at  least  not  on  so  slight  a  one  as  Mr.  Fielden's. 


COMPARISON  BETWEEN  COST  TO  ENGLISH  AND  TO  BOMBAY  SPINNERS 
OF  PRODUCING  AND  LAYING  DOWN  IN  THE  EAST,  I  LB.  OF  20's 
YARN. EXCHANGE    IS.    5D. 


Cost  to 

Advantage  to 

English 
Spinner 

Indian 
Spinner 

English 
Spinner 

Spinner 

d. 
5-69 
0.42 
0.05 
I. II 
0.28 
0.40 

d. 

5 

0.64 

0.16 

0.99 

0.46 

0.25 

d. 

0.22 
0.  II 

0.18 

d. 
0.69 

Depreciation  and  interest  on  mill  and  machinery 

Coals .■ 

Wages   

0.12 

Stores  

Sundries 

0.15 

Cost  at  mill   

Packing  and  carriage  to  Bombay 

7-95 
0.50 

7-50 

0.51 

0.96 
0.50 

Delivered  at  Jjombay 

8.45 

7-50 

0.51 

1.46 

Net  advantage 

0.95 
0.44 

0.70 

0.26 

Delivered   in  China 

8.65 

7.76 

0.51 

1.40 

0.89 

It  will  therefore  be  taken  for  granted  that  the  Indian  spinner 
has  an  especial  advantage  through  a  saving  in  the  cost  of  trans- 
portation. That  labor  is  cheaper  in  India  is  not  admitted  by  all 
the  experts.  Wages,  it  is  true,  arc  much  lower  and  the  hours  of 
labor  are  considerably  longer ;  but  here  again  it  appears  quite 
distinctly  "that  cheap  labor  does  not  in  the  least  mean  cheap 
production ;  that  on  the  contrary  a  low  cost  of  production  and  a 


52  INDIAN    SILVER    CURRENCY. 

high  rate  of  wages  go  hand  in  hand."'  It  is  generally  conceded 
that  from  three  and  a  half  to  five  times  as  many  operatives  are 
needed  in  India  as  in  Lancashire  to  care  for  the  same  number  of 
spindles.  Add  to  this  the  high  cost  of  superintendence;  a 
superintendent  is  necessarily  a  European  at  an  enormous  salary — 
an  expense  which  plays  no  part  at  Manchester,  or  Oldham. 
Yet  it  is  credibly  asserted  that  the  Indian  laborers  have  improved 
in  recent  years  ;  wages  in  Bombay  have  correspondingly  increased 
very  largely.  The  cost  of  a  mill-plant  in  India  is  naturally  much 
higher  than  in  England,  because  everything  must  be  obtained 
from  Europe.  Mr.  Fielden  estimated  in  1887  the  average  cost 
per  spindle  in  Bombay  at  about  ^3,  and  in  England  22s.  to  25s. 
Coal  must  also  be  brought  from  England,  and  is  three  or  four 
times   dearer  in  India  than  in  Lancashire. 

That  it  is  essentially  cheaper  cost  of  transportation  which  has 
raised  the  Indian  industry  to  such  a  height  also  appears  from  the 
following:  There  is  unanimity  in  the  opinion  that  Lancashire  is 
not  capable  of  competing  except  in  the  coarser  kinds  of  yarn  up 
to  about  28's  or  32's,  while  now  as  well  as  formerly  it  controls 
not  only  the  Indian  but  the  east  Asian  markets  in  the  fine  num- 
bers, and  its  exports  of  cloths  hither  might  have  even  risen  very 
considerably.  As  regards  the  former,  it  is  precisely  the  raw 
material  and  the  cost  of  transportation  which  play  the  principal 
role  ;  while  in  the  finer  grades,  for  which  the  skilled  labor  and 
climate  of  Lancashire  are  necessary,  India  cannot  compete. 

The  English,  however,  purposely  pass  over  in  silence  an 
important  consideration  by  which  the  depreciation  of  silver  has 
certainly  been  of  advantage  to  the  British  cotton  industry.  In 
the  Indian  cotton  mills  the  capital  invested  is  mainly  English, 
with  a  little  Indian  ;  and  there  is  no  doubt  that  English  capital- 
ists would  have  invested  their  money  in  so  profitable  an  industry 
to  a  far  greater  extent,  if  they  had  not  had  —  as  is  commonly 
complained  of  in  India  —  a  verv  justifiable  dread  of  investments 
in  countries  in  which  their  interest  is  i)aid  in  silver  and  where 
they  never  know  how  many  pounds   sterling   they  shall    receive, 

*  J.  Schoenhof,  The  Economy  of  High  Wages,  New  York,  1892,  p.  31. 


COTTON    INDUSTRY.  53 

but  arc  almost  certain  to  obtain  each  year  less  gold  for  their 
income  in  rupees.  If  India  had  had  no  depreciating  standard,  their 
industries  would  surely  have  had  a  very  much  larger  capital  at  their 
disposal,  and  the  competition  zvotdd  have  been  much  sharper  and  one 
more  keenly  felt  by  Lancashire. 

It  should,  furthermore,  not  escape  attention  that  the  extent 
of  the  market  for  machine-made  cotton  goods  in  India  is  com- 
paratively limited.  Only  in  the  cities  are  they  generally  con- 
sumed, and  the  urban  population  amounted,  at  the  last  census, 
only  to  something  over  27  millions  out  of  287  millions;  thus 
pretty  nearly  the  whole  agricultural  population  satisfy  their 
Remands  from  the  products  of  domestic  industry,  which  in  India 
ia  very  ancient.      Hunter'  remarks  on  this  : 

"While  the  cotton  industry  in  England  dates  back  only  a 
few  centuries  we  find  it  in  India  by  the  time  of  the  Mahäbhärata. 
The  Greek  word  for  cotton,  aCvhov,  is  etymologically  the  same  as 
the  name  for  India,  or  Sind  ;  while  in  later  days  Calicut  on  the 
Malabar  coast  has  given  its  name  to  calico.  Cotton  cloth  was 
always  the  only  material  for  Indian  clothing,  with  the  exception 
of  Assam  and  Burma,  where  silk  is  preferred  ;  perhaps  this  is  a 
relic  of  a  lost  trade  with  China.  The  writer  of  neptVAov?,  our 
oldest  authority  on  Indian  trade,  names  a  great  number  of  cot- 
ton fabrics  under  the  exports  ;  and  Marco  Polo,  the  first  Chris- 
tian traveler,  dwells  upon  the  cotton  and  linen  of  Cambay. 
When  European  adventurers  found  their  way  to  India,  cotton 
and  silk  always  formed  the  main  contents  of  the  rich  cargoes 
which  they  brought  home.  The  English  especially  appear  to 
have  been  very  careful  to  establish  their  earliest  settlements 
in  close  proximity  to  a  weaving  population,  as  at  Surat,  Calicut, 
Masulipatam,  Hugli.  In  delicacy  of  texture,  in  purity  and  artis- 
tic quality  of  color,  in  gracefulness  of  design  the  Indian  fabrics 
have  yet  to  find  their  equal  in  the  whole  world.  Yet  as  regards 
cheapness,  they  could  not  hold  out  against  the  competition  of 
Manchester.  A  variety  of  circumstances  worked  together  to 
injure  the  local  industry.  In  the  last  century  England  shut  the 
'  Hunter,  The  Indiaii  Einpire,  p.  470. 


54  INDIAN    SILVER    CURRENCY. 

Indian  cotton  fabrics  out  of  its  markets,  not  by  duties,  but  by  a 
series  of  statutes  which  forbade  the  wearing  of  imported  cotton 
goods.' 

"A  change  in  fashion  in  the  West  Indies,  after  the  abolition 
of  slavery,  took  away  the  best  remaining  customer,  and  mean- 
while the  products  of  Lancashire  cheapened  by  improvements  in 
machinery  were  coming  to  the  front.  In  more  recent  times, 
although  the  high  price  of  raw  cotton  during  the  War  of  Seces- 
sion was  of  profit  to  the  cotton-growers,  it  almost  entirely 
ruined  the  local  trade  in  fabrics  in  the  districts  producing  cotton. 
In  addition  to  this  the  necessity,  under  which  England  lay,  to 
export  to  India  something  to  pay  for  the  various  imports,  gave  to 
this  branch  of  trade  constantly  an  artificial  and  inflated  character. 

"From  these  considerations  we  find  that  hand-weaving 
even  yet  maintains  its  position,  although  certainly  with  varying 
success  in  different  parts  of  the  empire.  The  trade  in  it  has 
become  unprofitable.  Little  is  manufactured  for  export  and  the 
makers  of  the  finer  sorts  are  disappearing.  The  far-famed  muslins 
of  Dacca  and  Arvi  are  now  nearly  extinct  specialties  ;  but  although 
as  a  rural  industry  weaving  is  carried  on  everywhere,  it  cannot 
be  said  that  it  is  flourishing.  Even  if  the  Manchester  goods  are 
cheaper,  yet  the  domestic  fabrics  are  generally  regarded  as  more 
durable.  Comparative  statistics  are  naturally  unattainable,  but 
according  to  approximate  estimates  three-fifths  of  the  cotton 
cloths  worn  in  the  country  are  woven  either  from  domestic  or 
imported  yarn." 

So  says  Mr.  Hunter,  one  of  the  best  authorities  on  the  coun- 
try. If  the  domestic  industry  continues  even  yet  in  Germany, 
how  can  it  vanish  in  an  instant  in  a  country  so  exceptionally  con- 
servative as  India  ? 

It  is  also  interesting  to  note  what  is  told  by  the  census  of 
1 89 1  concerning  hand-weaving.  According  to  the  enumera- 
tion of  1 89 1  not  less  than  8,820,466  persons  lived  by  the  manu- 
facture   of    cotton    fabrics,'  of    whom    about     120,000    laborers 

'  Hunter,  ibid.,  p.  448. 

'If  we  reckon  five  to  a  family,  this  gives  over  1,760,000  cotton  operatives. 


MOVEMENT    OF    TRADE    IN    GENERAL.  55 

(including  their  families,  about  6oo,ooo  persons)  were  engaged 
in  the  modern  establishments  ecjuipped  with  machinery.  The 
Census  Report^  thereupon  remarks,  according  to  the  statements 
of  Mr.  Stuart,  Census  Commissioner  of  Madras,  that  the  house- 
industry  has  slowly  grown  in  the  last  ten  years  ;  and  that  from 
the  material  collected  regarding  castes  it  is  deduced  that  this 
increase  is  recruited  from  the  classes  which  do  not  belong  to  the 
castes  in  which  the  cotton  industry  is  traditional.  He  concludes 
from  this  that,  although  the  increase  is  but  slight,  there  is  some- 
thing to  be  earned  in  this  occupation.  The  domestic  product, 
although  strong  and  coarse,  is  clean  and  durable,  and  still  con- 
trols the  rural  markets,  especially  among  the  small  farmers, — 
a  fact  which  strikes  everyone  who  may  go  but  once  into  the 
country  districts.  But  in  the  cities  the  foreign  comj:)etition  is 
undoubtedly  keener,  for  the  finer  products  of  the  hand-loom 
must  be  much  dearer  than  those  made  by  European  machinery, 
because  the  task  of  the  laborer  is  now  so  simplified,  and  the 
freights  are  so  low ;  and  it  is  the  dweller  in  cities  who  is  first 
accessible  to  innovations.  Therefore,  if  we  consider  what  a 
small  fraction  of  the  population  lives  in  cities  and  how  few  of  the 
country  people  wear  fine  garments,  it  does  not  ajipcar  as  if  the 
common  hand-weaver  could  be  driven  out  of  the  field  by  any 
competition  whatever.  Only  the  maker  of  muslins  and  of  those 
airy  stuffs  which  the  Anglo-Indians  call  "woven-air,"  have  to 
suffer. 

D.    THE    MOVEMENT    OF    TRADE    IN    GENERAL. 

It  would  carry  us  too  far  afield  to  treat  here  singly  the  other 
chief  articles  of  Indian  foreign  trade ;  it  will  be  sufificient  to 
briefly  run  over  the  products  whose  exports  or  imports  amount 
to  more  than  a  million  Rx.  In  the  order  of  their  im])ortance' 
these  are  as  follows  : 

Exports. 

Raw  cotton        ....   16.5      Grains       -  -  -  .  -     Q.3 

Rice     -         -         -         .         .        12.9     Opium  ....  g_ß 

'P.  105. 

=  The  figures  are  in  millions  of  K.x.  for  the  year  iSgo-i. 


56  INDIAN    SILVER    CURRENCY, 


EXPORTS.- 

-Continued. 

Raw  jute  - 

-     7-6 

Indigo - 

3-0 

Cotton  twist  and  yarn    - 

6.6 

Cotton  cloth 

-     2.9 

Wheat      - 

-     6.0 

Jute  fabrics  - 

2.5 

Tea      - 

5-5 

Raw  wool 

-      1.6 

Hides  and  pelts 

-     4-7 

Coffee  -         -         -         - 

1-5 

Imports. 

Cotton  cloth 

-  27.2 

Woolen  goods  - 

-     1.8 

Cotton  yarn  - 

3-8 

Coals    -         -         -         - 

1-5 

Sugar 

-     34 

Provisions 

-     1-5 

Oils      -         -         -         - 

2.6 

Silk  goods     - 

14 

Iron 

-     2.6 

Wearing  apparel 

-     1-3 

Machinery    - 

2.1 

Iron  and  steel  goods 

1.2 

Railway  supplies 

-     2.0 

Raw  silk  -         -         -         - 

-     I.I 

Copper 

1.8 

If  we  now  examine  the  movement  of  trade  m  general  since 
1881-2  —  after  the  consequences  of  the  great  famine  had 
disappeared  —  we  find  that  the  total  exports  of  merchan- 
dise from  India  rose  [in  the  ten  years  ending  1890-1]  from 
81.9  millions  Rx.  to  108  millions  Rx.,  or  32  per  centum;  while, 
on  the  other  hand  the  imports  of  merchandise  in  the  same  decade 
rose  from  47.0  millions  Rx.  to  66.6  millions  Rx.,  or  41.7  per 
centum.  The  very  fact  that  the  imports  into  India  rose  nearly 
10  per  centum  more  than  the  exports  might  in  a  measure  serve 
to  destroy  belief  in  the  thesis  —  so  irrefutably  established  accord- 
ing to  the  views  of  German  agrarians  and  of  Professor  Friedberg 
—  that  a  depreciating  standard  favors  exports  and  discourages 
imports.  If  this  theory  were  true,  it  ought  above  all  to  appear 
in  the  trade  of  India  with  those  countries  that  meet  their  obliga- 
tions to  foreign  nations  in  gold.  Among  the  gold-standard 
countries  with  which  India  trades  the  United  Kingdom  naturally 
stands  foremost.  How  has  the  trade  with  her  developed  since 
1881-2?  In  1881-2,  the  exports  of  merchandise  from  India 
to  Great  Britain  and  Ireland  amounted  to  34.9  millions  Rx.,  in 
1891-2,  to  34.6  millions  Rx.,  or  even  a  slight  decline.  The 
imports,  on  the  other  hand,  from  the  mother-country  to  the 
colony  rose  from  38.7  millions  Rx.  to  48.3  millions  Rx.,  or  nearly 


MOVEMENT    OF    TRADE    IN    GENERAL.  $7 

25  per  centum.  Likewise  the  exports  from  India  to  France 
remained  constant  from  1881  to  1890  at  about  8  millions  Rx. ; 
until  the  year  1 891-2,  with  its  exceptionally  large  exports  of 
wheat,  caused  a  rise  to  1 1  millions  Rx.  The  exports  to  Germany, 
on  the  contrary,  rose  sharply  from  758,393  Rx.  to  5,091,165  Rx. ; 
and  imports  from  78,252  Rx.  to  1,524,969  Rx.  All  in  all,  in 
spite  of  Professor  Friedberg's  axiom  and  most  elementary  prop- 
osition of  political  economy,  the  above  mentioned  theory  has 
not  in  the  least  proved  true  of  India,  which  has  had  a  decidedly 
depreciated  standard  of  value;  and  we  must  accept  Nasse's 
words:  "It  is  not  probable  that  Indian  articles  of  export  would 
have  been  brought  in  very  much  less  quantity  to  the  European 
markets  and  there  sold  at  higher  prices,  if  India  had  had  the 
same  standard  as  the  nations  of  Western  and  Central  Europe,  or 
if  the  ratio  of  silver  to  gold  had  not  changed  since  1873." 


CHAPTER  III. 

THE    FINANCIAL    CONDITION   OF  THE   EAST  INDIAN  GOVERN- 
MENT.—COMPLAINTS    OF    ITS    OFFICIALS. 

§    I.    THE  CONDITION  OF  THE  GOVERNMENT. 

At  an  early  period  the  Indian  Government  clearly  recognized 
what  a  serious  danger  threatened  it  through  the  depreciation  of 
silver.  In  the  beginning  of  1876,  Sir  William  Muir  had  already 
said  in  his  report  upon  the  budget  for  1876-7:  "The  sudden 
depreciation  in  the  value  of  silver  and  the  consequent  embarrass- 
ment of  the  Indian  Government,  which  is  annually  obliged  to 
pay  in  England  a  sum  of  about  i  5  millions  pounds  sterling  in 
gold,  is  undoubtedly  fraught  with  great  danger  in  the  future.  In 
truth,  it  can  be  said  that  this  danger,  from  whatever  point  of  view 
we  may  regard  it,  is  the  greatest  which  has  ever  threatened  Indian 
finances.  War,  famine,  drought  have  often  visited  far  greater 
losses  upon  the  treasury  than  the  damage  incurred  this  year  by  the 
fall  in  the  price  of  silver.  But  such  calamities  pass  by  ;  the  loss 
is  distinctly  ascertained  and  limited  ;  if  it  is  covered,  then  the 
finances  again  stand  upon  a  sure  and  stable  basis.  This,  however, 
is  not  the  case  here  ;  the  immediate  effect  of  the  fall  of  silver  is 
already  serious  enough,  as  has  been  shown.  But  that  which 
makes  the  matter  so  exceptionally  important  is  that  no  one  can 
foresee  the  end.     The  future  is  wrapped  in  uncertainty." 

This  hits  the  nail  on  the  head.  It  is  not  so  much  the  extent 
of  the  loss  as  it  is  the  uncertainty,  and  the  impossibility  of  making 
estimates  approximating  in  a  slight  degree  to  the  truth,  which 
presents  such  exceptional  diflficulties  to  the  Indian  minister  of 
finance.  The  ordinary  revenue  of  India  all  comes  in  in  silver, 
except  about  ;i^200,ooo,  which  is  paid  in  England  in  gold  at  the 
India  office   in   a  number  of  small  items      On  the  other  hand, 

58 


CONDITION    OF    TIIK    GOVERNMENT.  59 

India  has  to  pay  annually  about  15  or  16  millions  pounds  sterling 
in  England.  Now  if  the  rate  for  rupees  falls,  naturally  more 
silver  rupees  must  be  sent  in  order  to  make  up  an  ecjual  sum  of 
gold.  In  1873-4,  before  the  depreciation  of  silver  began,  there 
was  to  be  paid'  in  gold  ^13,285,678  ;  at  a  rate  of  is.  io.35id. 
to  a  rupee  it  amounted  to  Rx.  14,265,700.  In  1892-3,  the  gold 
obligations  stood  at  ;^i6,532,2i  5  ;  the  estimates  supposed  a  rate 
of  IS.  4d.  and  counted  upon  a  surplus"  of  Rx.  146,600;  yet  the 
rate  fell  to  is.  2,985d.,  and  although  the  income  rose  above  the 
estimates  by  about  Rx.  1,653,300,  a  deficit  resulted  of  Rx.  1,081,- 
900.  These  items  of  expenditure  which,  in  1873-4,  had 
required,  Rx.  17,751,920,  took,  in  1892-3,  Rx.  26,478,415.  The 
estimates  for  1893-4  (published  before  the  closing  of  the 
mints),  taking  the  rate  of  exchange  at  is.  2^d.,  show  a  deficit 
of  Rx.  1,595,100. 

Thus  Sir  D.  Barbour^  rightly  says  :  "Our  financial  situation 
is  dependent  on  the  mercy  of  the  exchanges,  and  of  those  in 
whose  power  it  lies  to  influence  the  price  of  silver.  If  we  assume 
for  the  present  budget  a  deficit  of  Rx.  1,595,100,  and  then  the 
rate  of  exchange  rises  one  penny,  we  shall  have  a  surplus  ;  if  it 
falls  to  the  same  extent,  the  deficit  will  amount  to  more  than  Rx. 
3,000,000.  If  we  increase  the  taxes  by  Rx.  1,500,000  then  a 
revolution  of  the  wheel  can  oblige  us  to  again  increase  the  taxes 
by  no  less  a  sum  ;  then  comes  a  change  again,  and  we  find  that 
no  increase  of  taxes  at  all  was  necessary.  Hence  it  is  clear  from 
what  has  been  said  that  it  is  a  question,  to  be  considered 
when  adopting  our  measures  for  next  year,  not  so  much  of 
an  increase  of  the  revenues  or  of  a  reduction  of  a  part  of  the 
public  expenditures  which  lie  under  our  control,  as  it  is  a  cjuestion 
of  the  chances  for  an  effective  regulation  of  the  currency 
question." 

This  is  quite  true  ;  but,  notwithstanding,  the  Indian  Govern- 
ment must  study  how  to  strengthen  its  financial  position 
irrespective  of  the    currency  question.     Before   we    examine   the 

•  Report  of  the  Indian  Currency  Committee,  §§  3  <?/  seq. 
'  Financial  Statement  for  1893-4,  P-  I5>  §  3i' 


60  '  INDIAN    SILVER    CURRENCY. 

items  of  the  budget  one  by  one,  permit  me  to  briefly  explain  in 
what  manner  the  gold  payments  are  made  in  England. 

A.      MEANS  OF  OBTAINING  GOLD. 

Payments  in  gold'  are  made  by  the  "India  Council"  in 
London  selling  through  the  Bank  of  England  to  bankers  and 
merchants,  who  have  to  remit  to  India,  council-bills  payable,  in 
rupees  or  telegraphic  transfers,  on  the  Treasury  at  Calcutta, 
Bombay,  and  Madras,  which  ever  is  desired. 

It  was  not  always  so.  When  the  Crown  took  away  the  Govern- 
ment of  India  from  the  East  India  Company,  and  found  itself 
obliged  to  make  large  gold  payments  in  England,  it  originally 
preferred  to  make  gold  loans,  because  the  remittance  of  coin  was 
impracticable.  Between  1857  and  1862  the  Indian  debt  in 
sterling  thus  rose  from  ^^4, 000,000  to  ^^3 5, 000, 000.  At  that 
time,  the  foreign  trade  of  the  country  did  not  make  the  show  it 
does  today  ;  the  exports  of  merchandise  were  not  very  much 
larger  than  the  imports,  and  remittances  of  the  precious  metals 
could  convert  a  favorable  into  an  unfavorable  balance.  If  we 
include  shipments  of  the  precious  metals  between  May  i,  1855 
and  April  30,  1862,  the  imports  exceeded  the  exports.  Then, 
in  consequence  of  the  American  War,  came  the  immense  pros- 
perity of  India;  in  the  years  1862  to  1865,  the  annual  excess  of 
exports  (including  the  precious  metals)  amounted  to  Rx. 
13,500,000.  Since  then,  until  1893,  in  spite  of  the  great  move- 
ment of  silver  from  Europe,  the  Indian  exports  continually 
exceeded  the  imports  —  as  is  quite  explicable  in  a  country 
regularly  obliged  to  send  abroad  interest  on  its  debt ;  the  traders 
therefore,  had  to  remit  to  India,  annually  large  sums  as  an 
equivalent  for  the  surplus  value  of  exports  over  imports  —  sums, 
which  in  reality  equaled  the  amount  which  the  Government  had 
to  pay  in  England.  Since  then,  the  Indian  Government  has  found 
it  possible  to  offset  their  demands  for  gold  remittances  over  against 
those  of  trade  and  thus  by  simple  exchange  operations  avoid  the 
sending  of  coin.     This,  therefore,  presents  a  method  by  means  of 

•Palgrave,  Dictionary  of  Political  Economy,  ^\i\c\t  "  Councils  Bills." 


CONDITION    OF    THE    GOVERNMENT.  6 1 

which  the  merchants  engaged  in  trade  between  Fingland  and 
India  —  or,  more  correctly,  their  bankers  —  procure  the  ready 
money  which  the  Indian  Government  needs  to  meet  their  obliga- 
tions, while  the  latter  covers  the  j^ayments  of  merchants  in 
India. 

Formerly,  these  council-bills  consisted  exclusively  of  bills  of 
exchange,  which  the  Bank  of  England  put  on  sale  each  Wednes- 
day, in  regard  to  which,  however,  it  was  usually  provided  that 
only  a  fixed  amount  on  Madras  would  be  furnished.  But  this 
became  gradually  modified  because  the  establishment  of  a  tele- 
graphic connection  with  India  completely  changed  the  character 
of  the  trade.  The  bill  of  exchange  involved  too  much  time,  and 
the  Indian  Government  found  that  it  received  more  for  tele- 
graphic transfers  than  for  exchange  ;  for  this  reason  it  decided, 
in  January  1 882,  to  sell  telegraphic  transfers  as  well  as  bills.  From 
the  beginning  these  telegraphic  transfers  were  in  good  demand, 
and  now  their  amount  generally  exceeds  the  bills,  especially 
when  there  is  a  pressing  demand  for  money  on  the  Indian  money 
market.  There  is  a  further  innovation  in  that  remittances  can  also 
be  had  on  another  day  than  Wednesday  ;  it  became  the  practice 
to  allow  further  sales  on  Thursday,  which  allowed  the  banks  to 
complete  their  remittances  by  paying  a  slight  increase  in  com- 
parison with  the  Wednesday  sales.  The  Bank  of  England  makes 
known  from  time  to  time  in  the  reports  of  the  money  markets  in 
the  newspapers  what  the  lowest  price  is,  what  amounts  are  for 
sale,  and  how  much  is  sold. 

The  sales  of  the  India  Office  should  not  be  regarded  from 
any  other  point  of  view  than  that  there  remains  to  the  Indian 
Government, —  which  has  to  pay  cjuite  a  large  part  of  its  current 
expenditures  in  England,  and  that  too  in  gold  —  only  the  choice 
(if  it  is  unwilling  to  create  debt  continually)  of  either  remitting 
silver  to  India,  or  of  selling  bills  or  telegraphic  transfers.  Now 
since  India  has  had  to  the  present  time  a  favorable  balance  of 
trade,  and  since  the  receivers  of  Indian  goods  must  therefore 
buy  more  bills  on  India  than  are  created  by  the  merchandise 
dealings,  it  would  have  been  in  the  highest  degree  foolish  for  the 


62  INDIAN    SILVER    CURRENCY. 

Indian  Government  to  have  followed  the  former  method  — 
i.  e.,  remit  silxer.  That  the  council-bills  depress  the  price  of 
silver  is,  of  course,  true,  since  they  diminish  the  demand  for 
silver;  but  if  we  comprehend  that  the  Indian  Government  would 
remit  silver  and  sell  it  in  London  in  order  to  meet  its  obligations 
in  gold,  the  effect  on  the  silver  market  in  that  case  would  not 
be  any  more  favorable. 

The  sale  of  government  bills  conforms  simply  to  the  needs  of 
the  Indian  Government  for  gold.  Mr.  Arendt'  is  in  error  in 
saying  :  when  the  sale  of  Indian  Government  exchange  increases, 
the  price  of  silver  falls,  and  vice  versa;  "he  who  has  eyes"  ought 
to  be  able  to  see  this  from  the  figures  given  in  his  own  state- 
ments. It  is  true,  of  course,  that  the  amount  of  exchange  paya- 
ble in  silver  must  increase  with  every  fall  in  the  price  of  silver, 
in  order  that  the  same  amount  of  gold  can  be  bought  as  formerly. 
But  Mr.  Arendt  does  not  limit  himself  to  this.  In  general,  he 
does  not  give  the  figures  of  the  council-bills  in  silver  but  uses 
as  the  basis  of  his  argument  figures  in  pounds  sterling.  Here  I 
may  be  permitted  to  ask,  from  where  has  Mr.  Arendt  taken  the 
figures  with  which  he  intends  to  prove  his  proposition.  All  his 
other  figures,  so  far  as  I  can  audit  them,  including  those  on  the 
sales  of  council-bills  from  1870-75,  are  correct.  But  the  figures  for 
the  sale  of  council-bills  in  the  years  1876-81  are  wrongly  stated. 
Mr.  Arendt  gives  for  the  six  years  11. 51,  8.64,  13.98,  14.70, 
15.48,  and  16.27  millions  pound  sterling;  while  the  correct 
figures  for  1875-6  to  1880-1  are  12.39,  12.70,  10.13,  13.95, 
15.26,  and  15.24  millions  pounds  sterling.''  If  Mr.  Arendt  had 
used  the  correct  figures  here,  he  could  not  have  reached  his 
false  conclusion  as  to  the  connection  of  the  depreciation  of  silver 
with  the  increase  of  council  bills. 

We  intend  to  further  treat  these  expenditures  of  India  in 
England  in  more  detail. 

■  Otto  Arendt  Open  Leiter  to  Ludwig  Bamberger,  Berlin,  1882,  p.  50. 

"See  the  tables  at  the  end  of  the  book  which  have  been  taken  from  the  ofticial. 
Englisli  sources.  Arendt  quoted  formerly  the  figures  of  tlie  fiscal  years  1S69-70  to 
1874-5. 


CONDITION  OF  THE  GOVERNMENT.  63 

B.  THE  EXPENDITURES  OF  THE  GOVERNMENT. 

(a)    TO    liE    I'AID    IN    GOIA)    (lIOME    CHARCES). 

Let  me  previse  that  these  expenditures  to  be  paid  in  gold 
are  designated  in  the  Indian  budget  in  the  following  manner: 
First  is  given  the  amount  in  pounds  sterling,  then  comes  a  head- 
ing "exchange,"  and  the  sum  of  both  of  them  givqs  the  amount 
in  English  pounds  of  reckoning  (Rx.).  This  is  derived  from  the 
fact  that  the  Indian  statistics  originally  regarded  the  pound 
sterling  as  equal  to  ten  rupees,  a  supposition  which  has  no  real 
justification,  because  the  parity  of  the  rupee  at  a  price  for  silver 
of  6o%d.  per  ounce  is  is.  lo^d.  In  1 891-2  the  rate  which  the 
Secretary  for  India  obtained  at  his  sales  of  council-bills  and  tele- 
graphic transfers  was  is.  4.793d.;  and  under  "exchange"  is 
given  in  the  budget  Rx.  6,973,213.  In  1892-3  there  was  a 
revised  estimate  of  is.  3d.  ("exchange,"  Rx.  9.938,200);  in  the 
budget  for  1893-4,  is.  2^d.  ("exchange,"  Rx.  9,935,900). 

The  total  expenditures  of  the  Indian  Government  in  England 
amounted,  in  1891-2,  to  ;^I5, 974,699  ;  in  1892-3,  to  ;^i6, 563,- 
600;  and  for  1893-4  they  are  estimated  at  ;^i  5,843,800.  About 
15-16  millions  pounds  sterling  have  the  expenditures  of  the 
Indian  Government  in  England  oscillated  for  a  series  of  years  ; 
they  form,  therefore,  a  very  important  part  of  the  current 
expenses,  which  annually  must  be  paid  in  the  mother  country. 

The  most  dangerous  thing  about  it  is  that  the  largest  items 
—  the  payments  for  interest  on  the  national  and  railway  debts 
contracted  in  gold  —  show  a  tendency  to  rise,  because  the  Indian 
Government  is  obliged  for  the  most  part  to  place  its  loans  in 
England.  The  increase  of  the  burden  would  have  been  more 
seriously  felt,  if  it  had  not  been  possible  for  India  to  make  a  very 
considerable  saving  in  recent  years  by  conversions.  Since  1887 
there  remain  only  3  and  31^  per  centum  Indian  sterling  loans, 
which  bear  about  the  same  rate  as  the  German  national  debt, 
which  pays  }4  per  centum  more.  India,  therefore,  has  unusually 
high  credit  on  its  gold  loans  ;  but  on  its  silver  loans  it  has  to  pay 
nearly  ^  per  centum  of  interest  more,  as  the  annexed  table '  shows  : 

'Appendix  to  Indian  Currency  Committee,  p.  272. 


64 


INDIAN    SILVER    CURRENCY. 


QUOTATIONS    OF    INDIAN    NATIONAL    DEBT. 


4  Per  Cent.  Rupee  Loan 

Indian  Sterling  Loan 

Year 

Quotations 
in  Calcutta 

Quotations 
in  London 

Quotations  of 

India  Council - 

Bills 

4  Per  Cent. 

3»^  Per  Cent. 

3  Per  Cent. 

Highest 

Lowest 

Highest 

Lowest 

Highest 

Lowest 

Highest 

Lowest 

Highest  Lowest 

1873 
1877 
1880 

105 
q8^ 

loir« 

col/ 

97 

88;^ 

81 H 

81^ 

71U 

87X 

8034: 

74;^ 

94  >^ 
81 

7714: 
78X 
67% 
68|4^ 

d. 
22% 
22X 
20H 
I9l< 
i8i\ 

20|| 
tXi/ 

d. 

21^ 

16% 
16/8 
14/8 

106)4 
I04H 
lOSH 
I04H 
102^ 

lOiX 
IO2X 
102^ 
lOI^ 
100  >^ 

100          nolä 

1884 
1887 
1890 
189I 
1892 

100  >^ 

193% 
107U 
io8}| 

95A 
95Ä 
96II 
1041V 
i03ii 

107/8 
103X 

108  j!^ 
I09>^ 

109  >^ 

I01|^ 

looX 

I05X 

105 

lobyi 

96X 
92>^ 

100^4: 

99 
98K 

91K 

85H 
95X 

74X 

94/^ 

62      1  16Ü 

94% 

.„ 

The  Indian  Government  would  have  had  great  difficulty  also 
in  placing  their  silver  obligations,  if  they  had  issued  no  other 
kind.  For  the  English  investor  preferred  a  less  rate  of  interest 
to  buying  a  bond  with  a  fluctuating  income ;  and  the  Indian 
investment  market  is  far  from  being  sufficiently  developed  to 
satisfy  the  pecuniary  needs  of  the  government.  A  large  sum  is 
constantly  required  especially  for  railway  construction,  and 
hence  the  sterling  debt  rose  from  ;^68.i4  millions  in  188 1-2  to 
;^I07.40  millions  in  189 1-2.  The  annual  requirements  for  the 
permanent  national  debt  are  at  present  about  £2.^  to  2.6  mil- 
lions, and,  for  the  railway  debt  and  for  sinking-fund  payments 
on  the  railways  purchased  by  the  state,  about  ^3.5  millions.  In 
addition,  there  is  an  item  of  ^2.1  millions  for  the  guaranteed 
private  railways.  The  service  of  the  public  debt,  including 
sinking-funds  and  payments  to  the  guaranteed  lines,  therefore, 
rises  to  ^8.3  millions,  or  more  than  half  of  the  demands  of  the 
Indian  Government  in  England. 

Next  to  the  service  of  the  public  debt  comes  the  provisions 
for  pensions  ;  under  which  there  is  to  be  paid  in  gold  for  pen- 
sions, retirement-payments,  etc.,  for  the  army  ("non-effective 
army")  about  ;iC2.2  millions;  for  the  civil  administration  about 
;^2.o  millions, —  or  an  annual  total  of  about  ;^4.3  millions. 

The  third  large  item  of  gold  payments  is  that  stated  under 
"army  effective"  as  about  i^2. 4   millions.     The   expenditures  of 


CONDITION    OF    THE    GOVERNMENT.  65 

especial  importance  arc  those  for  transjjortation  of  trooj).s,  mobi- 
lization, etc. 

The  other  items  are  of  much  less  im})ortance :  for  cost  of 
administration  in  England  about  one-half  million  pounds  sterling 
are  paid.  The  remaining  expenditures  in  gold  are  too  insignifi- 
cant to  recjuire  mention. 

{d)   TO   BE   PAID   IN   SILVER. 

It  would  carry  us  too  far  afield  to  speak  here  in  detail 
regarding  the  ex|)enditures  to  be  paid  in  silver. 

But  above  all,  attention  should  be  directed  to  the  army 
budget ;  the  expenses  for  the  army  are  exceedingly  large.  They 
amounted  in  recent  years  to  about  Rx.  15.6  millions;  and  if  we 
include  the  expenses  to  be  paid  in  England  mentioned  above, 
and  adding  loss  by  exchange,  we  reach  the  large  sum  of  over 
Rx.  23.5  millions.  The  strength  of  the  army  was,  in  1889-90, 
72,444  Europeans,  145,363  natives,  and  998  ofificers  of  various 
ranks,  —  or  in  all  218,805  men.  The  Indian  Army  budget  is  ris- 
ing slowly,  because  the  cost  of  maintaining  the  British  troops  is 
yearly  becoming  dearer.  For  the  pay'  of  British  troops  stationed 
in  India  or  in  other  parts  of  the  British  possessions  is  fixed  in 
sterling,  and  must  be  reduced  to  the  standard  of  the  country 
where  the  respective  troops  are  serving  at  a  rate  to  be  determined 
annually  and  approximating  as  nearly  as  possible  to  the  yearly 
average.  In  addition,  if  we  include  the  fact  that  the  obtaining 
of  gold  for  that  part  of  the  army  expenses  to  be  paid  in  England 
becomes  dearer  yearly  with  the  fall  in  the  price  of  silver,  there 
results  a  rise  in  the  budget  from  Rx.  20.7  millions  (1889-90)  to 
Rx.  23.0  millions  (1893-4).  The  expenditure  of  230  millions 
rupees  for  the  army  is  no  light  burden  for  India,  especially  if  we 
regard  these  two  things.  In  the  first  place  a  large  ])art  of  the 
army  is  maintained  only  from  the  point  of  view  of  European 
politics ;  because,  in  case  of  a  conflict  between  England  and 
Russia,  an  attack  of  the  latter  power  on  India  is  feared,  and  the 
garrisons  in  the  northwest  are  strong,  much  stronger  than  the 

^  Financial  Statement  ioT:  1 893-4,  p.  II. 


66 


INDIAN    SILVER    CURRENCY 


safety  of  the  country  would  otherwise  require;'  for  the  eventual 
invasion  of  the  enemy  is  to  be  expected  from  there.  But,  sec- 
ondly, the  strength  of  the  Indian  Army  is  partly  determined  by 
the  fact  that  Indian  troops  are  for  the  most  part  used  in  the 
colonial  wars  of  the  English,  as  against  Afghanistan,  in  Egypt, 
and  in  South  Africa ;  and  consequently  a  greater  effective 
strength  is  required. 

*rhe  Indian  debt  contracted  in  silver  is  likewise  very  consid- 
erable, but,  for  the  reasons  above  given,  it  increases  much  more 
slowly  than  the  sterling  debt.  In  189 1-2  it  amounted  to  Rx. 
102.69  millions  as  against  Rx.  88.65  millions  in  1881-2. 

The  cost  of  the  civil  administration  is  partly  borne  by  the 
Indian  Empire,  but  partly  also  by  the  provinces  and  local  gov- 
ernments. The  latter  have  to  meet  almost  entirely  the  cost  of 
building  roads,  of  justice,  of  police,  and  of  schools,  and  partly 
of  the  expenses  of  collecting  the  taxes  (but  excluding  a  large 
part  of  the  administration  of  the  land  tax).  The  remaining  costs 
of  administration  are  covered  by  the  Empire.  The  figures  of  the 
budaret  are  as  follows  : 


EXPENSES    IN    INDIA 

(inclusive  of  army 

AND    railways). 

Expenditures  of  Empire 

Expenses  of  the  Provincial  and 
Local  Governments 

Rx. 
41,296,663 
41,341.600 
42,464,200 

Rx. 

24,708,097 

1892-3  revised  estimate 

23,623,500 
24,108,100 

Under  administration,  that  for  the  railways  requires  only 
slight  aid.  The  provision  for  railways  is  included  under  interest 
payments  of  the  railway  debt  and  the  transactions  with  the 
guaranteed  lines : 


Income 

Expenditures 

Deficit 

Rx. 

19,938,046 
19,064,200 
19,551.700 

Rx. 

20,253,910 
20,775,000 
21,545.^00 

Rx. 

315.864 

1892-3  revised  estimate 

1893—4  estimate 

1,710,800 
1,994,100 

"  It  should  not  be  forgotten  that  the  semi-military,  organized  police  amounted   in 
1891,  according  to  the  Statistical  Abstract,  p.  60,  to  152,499  men. 


CONDITION    OF    THE    GOVERNMENT. 


67 


The  sums  are  balanced  by  the  surplus  of  the  j)ost  office,  tele- 
graphs, and  mint,  which  in  the  three  years  amounted  to  Rx. 
146,548,  227,100,  and  111,500  respectively. 

(c)    THK    INCOME.» 

The  chief  source  of  income  is  the  land  tax.  The  results  (for 
the  Indian  Empire,  the  provinces,  and  the  local  governments  com- 
bined) were  as  follows,  —  or  more  than  one-fourth  of  the  total 
income  of  the  state  : 


1 89 1-2  definitive 

1892-3  revi.sed  estimate 
1893-4  estimate 


Gross,  excluding 
"  Refunds  and 
Drawbacks" 


Rx. 

23,901,284 
24,800,500 
25,101,200 


Cost  of  Collection 


Rx. 

3.835,126 
3,956,100 
4,112,300 


Net 


Rx. 
20,066,158 
20,844,400 
20,988,900 


In  India  the  state  or  monarch  has  always  had  a  share  of  the 
rent  or  increment  derived  from  real  estate.  This  tax  is  levied 
according  to  a  valuation  in  which  are  included  estates  whether  cul- 
tivated by  the  owner  or  rented.  In  certain  districts,  which  annu- 
ally pay  about  Rx.  4,311,000,  the  valuation  was  definitely  fixed 
for  all  future  time  about  lOO  years  ago.  The  remaining  parts  of 
India  are  newly  valued  at  periods  of  from  10  to  30  years.  In 
the  case  of  large  estates  of  a  few  hundred  up  to  several  thousand 
acres  the  share  is  usually  about  a  half  of  the  rent  enjoyed  by 
the  owner.  In  the  case  of  small  estates  farmed  by  their  owners, 
the  land  tax  is  levied  on  the  cultivated  area  at  a  rate  determined 
in  each  case  by  the  fertility  of  the  soil,  and  representing  about 
one-half  the  net  product.  The  districts  valued  for  all  time  com- 
prise the  greater  part  of  Bengal,  a  quarter  of  Madras  and  cer- 
tain districts  in  the  south  of  the  northwestern  provinces.  As 
concerns  the  portions  valued  at  briefer  intervals,  the  land  situ- 
ated in  the  northwestern  provinces,  in  Punjab,  Oudh,  the  central 
provinces  and  Orissa  is  held  in  communal  ownership  or  by  large 

'  The  statements  regarding  the  tax  system  are  taken,  when  not  otherwise  men- 
tioned, from  r/ie  Statement  exhibiti7ig  the  Moral  and  Material  Progress  and  Condition 
of  India,  1889-90  ;  the  tables  of  figures,  as  in  former  quotations,  from  the  Financial 
Statement. 


68  INDIAN    SILVER    CURRENCY. 

proprietors  ;  while  in  Bombay,  Burma,  Assam  and  Berar,  as  well 
as  in  the  greater  part  of  Madras,  the  land  is  cultivated  by  small 
proprietors.  In  the  districts  valued  for  the  indefinite  future  the 
land  tax  amounts  to  about  two-thirds  of  a  rupee  per  acre  of  cul- 
tivated land,  and  represents  about  one-fifth  of  the  net  product, 
or  about  one-twenty-fourth  of  the  gross  product.  On  the  aver- 
age the  natural  advantages  of  climate  and  of  soil  are  greater 
here  than  in  the  districts  revalued  periodically.  In  the  latter 
the  land  tax  amounts  to  about  one  and  one-half  rupees  per  acre 
of  cultivated  land,  which  is  somewhat  less  than  one-half  of  the 
actual  or  estimated  net  product,  and  probably  one-tenth  or  one- 
twelfth  of  the  gross  product.  The  figures  of  the  net  product 
and  the  land  tax  vary  greatly  according  to  the  fertility  of  the 
soil,  the  climate,  the  rainfall  and  the  possibility  of  bringing  the 
produce  to  market  or  to  the  seacoast.  Payment  for  water  which 
is  delivered  by  the  state  canal,  or  reservoirs,  for  the  purpose  of 
irrigation  is  regulated  either  according  to  the  extent  of  the  area 
irrigated  or  of  the  water  used.  If  a  land  owner  or  a  tenant 
undertakes  improvements  he  is  not  thereby  more  heavily  mulcted 
by  the  land  tax." 

That  so  unusually  heavy  a  tax  —  at  least  to  the  European 
mind  —  can  be  increased  only  with  difficulty  is  clear  without  fur- 
ther explanation.  Besides,  the  Indian  farmer  is  in  such  a  pitiful 
material  condition,  he  groans  so  heavily  under  excessive  exac- 
tions both  from  the  landlord  and  the  usurer,  that  an  increase 
of  the  land-tax  would  easily  entirely  annihilate  him.  In  their 
own  interest  the  English  dare  not  act  like  Asiatic  conquerors 
who  squeeze  the  last  drop  of  blood  out  of  the  people  and  wholly 
ruin  them  without  comj)unction  in  order  to  enrich  themselves. 

Next    in   importance    to    the  land-tax   comes  the  tax  on  salt 

'  Details  on  the  land  tax  are  given  by  :  Wolf,  Thatsachen  und  Aussichten  der  Ost- 
indischen Konkurrenz  im  Weizenhandel,  p.  52  et  seq.;  KnhlSind,  Aus  dem  Verfassungs-  und 
Verwaltungsrecht  des  Britisch-indischen  Kaiserreiches,)^.  408;  Hunter,  The  Indian 
Empire,  p.  333  et  seq.  The  latter  gives  much  lower  figures  than  the  official  report  above 
cited.  According  to  him,  the  officers  entrusted  with  the  collection  of  the  land  tax 
make  so  many  deductions  in  favor  of  the  farmer  that  the  tax  on  the  average  amounts 
to  only  5.50  per  centum  of  the  gross  product. 


CONDITION    OF    THE    GOVERNMENT.  69 

which  yields  a  yearly  net  of  about  Rx.  8.1  millions.  It  is  levied 
either  as  an  import-duty  upon  all  salt  imported,  or  as  a  tax  upon 
that  produced  in  India.  Its  rate  fluctuated  formerly  from  one- 
fifth  rupee  in  Burma  to  three  and  one-fourth  rupees  in  Bengal 
for  a  maund  of  82  lbs.  In  1 889-90,  it  amounted  to  two  and 
one-half  rupees  in  the  whole  of  India  except  in  Burma  where 
only  one  rupee  was  levied.  It  is  also  very  difficult  to  increase 
the  salt  tax,  because  the  poorest  people  are  heavily  burdened 
by  it. 

Opium  brings  in  not  much  less  than  salt ;  although  in  this 
case  the  tax  does  not  fall  on  the  Indians,  but  on  the  Chinese  ; 
since  it  is  levied  only  on  the  opium  transported  to  China,  and 
this  has  almost  no  competition.  The  returns  from  it,  exclusive 
of  the  very  considerable  cost  of  collection,  are  from  Rx.  5  to 
6.5  millions.  The  results  vary  largely,  because  they  depend 
upon  the  condition  of  the  market  and  upon  the  fate  of  the 
crops.  The  opium  tax  is  levied  partly  through  a  monopoly  in 
Bengal,  partly  through  the  duty  upon  all  opium  exported  from 
the  native  states. 

Although  the  poppy  grows  wild  over  the  largest  part  of  India, 
its  cultivation  on  British  soil  is  permitted  only  in  parts  of  Ben- 
gal, the  northwestern  provinces  and  Oudh.  A  few  thousand 
acres  in  Punjab  are  cultivated  for  local  use.  The  opium-farmer 
in  the  monopoly  districts  receives  aid  which  enables  him  to  pre- 
pare the  soil  for  the  crop.  He  then  has  to  deliver  the  whole 
product  to  an  opium-agent  at  a  fixed  price,  through  whom  it 
passes  to  the  state  factory  at  Patna  and  Ghazipur  where  it  is  then 
prepared  for  the  Chinese  market.  The  boxes  of  prepared  opium 
are  disposed  of  at  monthly  auctions  in  Calcutta;  to  prevent 
speculation  and  to  keep  the  price  steady  the  quantity  of  opium 
to  be  offered  for  sale  at  each  auction  is  published  a  year 
beforehand.  In  1892-3,  48,850  boxes  were  sold  at  an  average 
of  1247  rupees  per  box,  while  the  estimate  had  assumed  only 
1050  rupees.  For  1893-4  an  average  price  of  1250  rupees  is 
anticipated,  although  less  will  be  brought  to  sale  on  account  of 
a  poor  crop. 


70  INDIAN    SILVKR    CURRENCY. 

In  many  native  states  of  Rajputana  and  of  Central  India 
opium  is  likewise  cultivated.  These  states  have  entered  into 
contracts  with  the  Anglo-Indian  government  in  which  they  bind 
themselves  to  adapt  their  own  to  the  British  system  and  to  pre- 
vent smuggling.  Upon  all  the  opium  which  is  exported  from 
their  territory  for  the  Chinese  market  they  raise  a  considerable 
tax,  and  this  opium  pays  into  the  Indian  tax  collectors  a  return 
which  a  few  years  ago  was  lowered  from  Rs.  650  to  Rs.  600  a 
box.  An  increase  of  the  income  from  opium  does  not  depend 
upon  the  Indian  Government  but  upon  the  outcome  of  the  crop. 

The  next  important  source  of  income  is  the  excise,  which 
yields  a  net  of  Rx.  4.9  to  Rx.  5.0  millions.  This  is  partly  levied 
by  granting  a  monopoly  of  the  sale  of  spirituous  liquors  and 
poisonous  drugs  to  a  county  [Bezirk),  and,  partly,  the  sale  of 
these  articles  is  permitted  only  to  the  possessor  of  a  license. 
In  several  regions  also  a  brandy  tax  is  levied  according  to  the 
percentage  of  alcohol  in  the  product.'  The  excise  does  not  seem 
capable  of  increase,  because  for  the  most  part  the  tribes  addicted 
to  drink  live  in  forests  and  mountains  difficult  to  watch,  and  in 
these  sparsely  settled  regions  the  material  for  illicit  distillation 
is  easily  obtained. 

Tobacco,  sugar,  tea  and  coffee  are  untaxed ;  they  grow 
throughout  all  India  and  are  consumed  by  all  classes  of  people. 
Tobacco  is  cultivated  in  almost  every  village,  and  old  and  young, 
man  and  woman,  smoke.  Regarding  the  possibility  of  a  tax  on 
tobacco  and  sugar,  the  report  of  the  Herschell  Committee  says, 
§  42:  "To  procure  a  revenue  from  them  by  means  of  taxation 
would  involve  constant  and  vexatious  interference  with  the  peo- 
ple, and  the  cost  of  collecting  and  enforcing  the  tax  would  be 
enormous  in  proportion  to  the  sum  realized.  Those  who  have 
given  evidence  on  this  subject,  and  who  entertain  the  gravest 
objections  to  an  increase  of  the  salt  tax,  arc  nevertheless  of 
opinion  that,  with  all  its  evils,  this  would  be  preferable  to  an 
attemj)t   to   raise   a   revenue  by  a  taxation  of  sugar  or  tobacco." 

'For  details  see  Statement  Exhibititig  the  Moral  and  Material  Progress  and  Con- 
dition of  India,  1889-90,  p.  90;  and  Ruhland,  loc.  cit.,  p.  442. 


CONDITION    OF    THK    GOVERNMENT.  7 1 

The  income  from  stamps  is  very  considerable.  The  returns 
from  them  are  rapidly  rising.  In  1 86 1-2  they  amounted  to 
Rx.  1.7  millions;  today  they  are  nearly  Rx.  4.3  millions.  The 
stamp  duties  are  levied  according  to  Act  VII.  of  1870  (Court 
Fees  Act)  which  lays  a  tax  on  complaints,  petitions  and  other 
documents  to  be  brought  before  the  civil,  criminal  and  revenue 
courts;  and  also  according  to  Act  I.  of  1879  (Stamp  Act)  taxes 
are  laid  upon  papers  required  in  trade,  such  as  bills  of  lading, 
evidences  of  debt,  checks,  bills  of  exchange,  quittances,  etc. 
The  tax  collected  from  the  dealings  of  private  persons  with  the 
public  authorities  constitutes  two-thirds  of  the  income  from 
stamps. 

There  exists,  besides,  an  income  tax,  according  to  Act  II.  of 
1886.  All  incomes  arising  from  salaries,  pensions  and  interest 
on  investments,  if  they  amount  to  more  than  Rs.  2000  annually, 
pay  five  pie  per  rupee  (2.6  per  cent.);  if  below  Rs.  2000,  four 
pie  per  rupee  (2  per  cent.).  Companies  have  to  pay  five  pie  on 
each  rupee  of  their  net  income.  Every  income  from  other 
sources  pays  a  tax  according  to  a  scale,  which  rises  progressively 
from  Rs.  10  on  Rs.  500  to  Rs.  42  on  Rs.  1999.  The  tax  on 
incomes  over  Rs.  2000  is,  as  in  the  first  case,  five  pie  per  rupee. 
All  annual  incomes  under  Rs.  500  are  untaxed,  as  are  also  all 
those  arising  from  agriculture,  and  the  salaries  of  military  men, 
provided  they  are  less  than  Rs.  500  per  month.  This  tax  yields 
something  over  Rx.  1.6  millions. 

The  introduction  of  an  income  tax  was  regarded  with  very 
great  dissatisfaction  by  the  Euro{)can  officials  of  the  government, 
because  they  had  been  seriously  injured  besides  this  by  the  fall 
in  the  rate  of  exchange,  and  they  rather  expected  an  alleviation 
than  an  addition  to  their  burden.  And  yet  the  income  tax  is 
the  necessary  completion  of  the  existing  system  of  taxation. 
Agriculture  is  heavily  burdened  by  the  land-tax,  and  it  is  not 
more  than  right  and  just  that  the  incomes  from  commerce  and 
industry,  which  are  exceptionally  large  in  India,  and  which  would 
be  wholly  exempt  without  the  income  tax,  should  also  contribute 
something  to  the  burdens  of  the  state.     That  the  officials,  whose 


72  INDIAN    SILVER    CURRENCY. 

salaries  are  quite  exactly  known,  should  be  most  seriously  affected 
by  this  tax  is  in  the  nature  of  things,  in  a  country  like  India. 

The  customs  duties  have  so  far  brought  in  relatively  small 
returns  —  only  about  Rx.  1.50  millions  —  because  India  has  had 
nearly  complete  free  trade.  Of  the  import  duties  only  that  on 
spirituous  liquors  is  moderately  profitable  ;  it  yielded,  in  189 1-2, 
Rx.  589,684.  There  exists,  further,  an  import  duty  of  six  pie 
per  gallon  on  petroleum  and  other  mineral  oils.  The  import  duty 
on  salt  has  already  been  spoken  of  under  the  salt  tax,  and  is  also 
presented  there  in  the  Indian  budget.  A  tax  of  no  financial 
gain,  but  one  extremely  characteristic  in  the  ways  and  means  of 
Anglo-Indian  colonial  policy,  is  that  on  weapons  and  munitions, 
which  ranks  third  among  existing  import  duties.  It  is  almost 
prohibitive  :  guns  pay,  e.  g.,  Rs.  50,  pistols  Rs.  15.  -But  persons 
who  have  weapon  permits  pay  only  10  per  cent,  ad  valorem  on 
weapons  destined  for  their  own  use.  This  duty  on  weapons  may 
have  contributed  not  a  little  to  the  result  that  the  quiet  and 
safety  of  the  country  is  today  so  marked.  Of  the  system  of 
export  duties  so  fully  elaborated  by  the  Mohammedans  in  earlier 
times  there  now  exists  only  an  export  duty  on  rice,  of  three 
annas  per  Indian  maund  of  82 1  pounds,  whose  amount  varies 
with  the  outcome  of  the  crop. 

The  remaining  income  from  forests,  tributes  of  the  feudal 
states,  etc.,  are  small. 

The  total  income  of  the  Empire  from  taxes  and  duties 
amounts  to  : 

1 891-2  derinitive -      Rx.  49,969,887 

1892-3  revised  estimate      .         -         -         -  "     51,473,400 

1893-4  estimate     -------     50,103,200 

The  provinces  and  local  governments,  to  cover  their  expendi- 
tures, raise  sums  in  addition  to  the  land-tax  and  stamp-duties, 
and  also  their  own  provincial  taxes,  which  are  placed  at: 

1891-2  definitive Rx.  24,467,173 

1892-3  revised  estimate      .         -         -         -  "    23,259,700 

1893-4  estimate "     23,356,900 

If  the  income  from   railways,  as  given  above,  is   counted  in 


Rx. 

89,143.283 

" 

00,021,200 

" 

90,005,700 

Rx 

.  88,675.748 

" 

91,103,100 

" 

91,600,800 

Rx 

.        467.535 

" 

1,081,900 

" 

1,595,100 

CONDITION    OF    THE    GOVERNMENT.  73 

here,   and  also   the   smaller   returns    from   waterworks,  etc.,   the 
total  of  the  income  amounts  to  : 

1891-2  definitive  ----- 

1892-3  revised  estimate 

1893-4  estimate     -         -  -         -         - 

If  we  set  off  the  ex})cnditures  of: 
1891-2  definitive   -         -         -         -         - 
1892-3  revised  estimate 
1893-4  estimate 

there  results  : 

1891-2  a  surplus  of         .         -         -         - 
1892-3  a  deficit  of       -         -         -         - 
1893-4  a  deficit  of         -         -         -         - 

(</)    CRITK-ISM. 

To  recapitulate  briefly,  the  Indian  budget  shows  a  slow  but 
steady  increase  of  income,  and,  also,  of  the  expenditures  to  be 
disbursed  in  silver.  But  the  ultimate  condition  of  the  finances  is 
dependent  upon  the  rate  of  exchange  ;  with  each  decline  of  the 
rate  there  is  an  increase  in  the  total  of  exchange,  computed,  of 
course,  in  rupees,  which  the  Indian  Government  must  sell  in 
London.  The  unfortunate  thing  is  that  a  great  part  of  their 
expenses  are  payable  in  gold,  while  all  the  income  is  paid  in 
silver. 

In  the  present  depressed  conditions  of  the  rates  of  exchange 
the  situation  of  the  Indian  Government  has  become  decidedly 
critical.  The  amounts  which  are  needed  to  meet  their  gold 
demands  have  become,  owing  to  the  renewed  decline  in  the  rates 
of  exchange,  even  much  greater  than  was  expected  by  Sir  David 
Barbour  in  his  very  pessimistic  estimate  for  1893-4;  and  the 
deficit  will  accordingly  be  considerably  greater.  In  order  that 
this  deficit  should  not  become  chronic,  the  means  of  relief 
adopted  must  be  drastic.  This  is  only  possible  either  by  a 
reduction  of  expenditures,  or  by  an  increase  of  income.  But, 
as  matters  now  stand,  any  material  saving  can  be  carried  through 
only  in  connection  with  the  army.  Since  the  Indian  Army,  as 
is  unanimously  agreed  by  all  those  conversant  with  the  condition 


74  INDIAN    SILVER    CURRENCY. 

of  affairs,  is  probably  now  only  barely  competent  to  meet  any  Rus- 
sian attack,  and  since  an  increase  of  the  present  effective  would  be 
very  desirable  for  the  integrity  of  the  British  Empire,  therefore 
a  saving  here  for  India  would  only  be  possible  if  England  should 
assume  a  part  of  the  cost  of  defending  the  Empire,  as  is  also 
done  in  other  colonies.  But  this  is  not  to  be  thought  of  at  pres- 
ent ;  for  any  English  Government  would  be  on  its  guard  against 
offering  to  its  constituents  new  taxes  in  favor  of  India. 

There  remains,  therefore,  only  an  increase  of  the  income. 
But,  since  all  the  Indian  experts  agree  in  urging  that  an  increase 
of  the  taxes  already  existmg  is  fraught  with  great  economic 
and  political  danger,  the  proposal  recently  made  to  impose  a 
customs-dutv  on  cotton  goods  ought  to  have  deserved  some 
attention.  Very  many  things  in  the  actual  situation  favor  such 
a  duty.  Above  all,  the  financial  condition  of  the  government, 
as  we  saw  above,  is  extremely  precarious.  As  the  value  of  cot- 
ton manufactures  annually  imported  is  about  Rs.  300  millions, 
such  a  duty  would  be  financially  very  profitable.  Furthermore, 
it  might  be  of  some  assistance  to  the  cotton  industry  of  the 
country  which  has  been  seriously  injured  by  the  late  currency 
reform,  by  being  cut  off  from  East  Asia,  its  principal  foreign 
market.  Lancashire  possesses  in  East  Asia  a  signal  advantage 
over  India  ;  because,  in  trading  with  countries  possessing  different 
monetary  standards  —  and  now  India  has  one  kind,  while  China, 
Japan,  etc.,  have  another  kind  —  the  essential  basis  is  an  admira- 
ble organization  of  currency  and  banking.  In  this  respect,  the 
English  cotton  industry,  supported  by  the  greatest  money  mar- 
ket in  the  world,  has  an  indefinite  advantage  over  India.  It 
might  go  hard  with  the  Indian  cotton  spinners  under  the  changed 
conditions  to  maintain  the  East  Asian  market,  which  was  won 
with  difficulty,  against  the  competition  of  the  English,  and  also 
that  of  the  Chinese  and  Japanese  which  has  lately  appeared. 
The  Indian  cotton  industry  is  now  more  than  ever  dependent  on 
the  home  market,  and  hence,  from  the  Indian  standpoint,  a  duty 
upon  imported  fabrics  would  certainly  be  of  advantage.  Lan- 
cashire, too,  could  bear  such  a  duty  fairly  well,  because,  as  said, 


COMPLAINTS    OF    OFFICIALS.  75 

it  has  obtained  a  more  than  sufficient  compensation  through 
the  currency  reform,  through  the  greater  steadiness  of  the  rates 
of  exchange  between  England  and  India  conditioned  on  a  more 
reasonable  policy  of  the  Indian  Government,  and  through  the 
advantage  it  possesses  in  the  East  Asian  markets.  However, 
another  way  out  of  the  difficulty  has  meanwhile  been  adopted. 
A  dutv  on  cotton  goods  was  avoided  ;  and  instead  of  it,  in  March, 
1894.  a  5  per  centum  ad  valorem  duty  was  imposed  on  all  other 
articles  of  importation,  including  silver.  The  English  interests 
overcame  the  Indian. 

II.    THE    COMPLAINTS    OF    OFFICIALS. 

If  we  take  into  account  the  fact  that  a  thorough-going  increase 
of  salaries  for  the  European  officials  of  the  Government  cannot 
be  postponed,  the  question  of  financial  reform,  or  the  obtaining 
a  higher  income,  becomes  of  especial  importance.  For  years 
there  has  prevailed  among  the  Indian  officials  a  deep-seated 
dissatisfaction  in  consequence  of  the  difficulties  arising  from  the 
fall  in  the  rate  of  exchange;  and  J.  T.  Wheeler,  sometime  Pro- 
fessor of  Moral  Philosophy  and  Logic  at  Madras  College,  as  the 
representative  of  the  "Indian  Uncovenanted  Civil  Servants," 
reproached  the  Indian  Government  before  the  Gold  and  Silver 
Commission'  with  insisting  on  their  bond,  like  Shylock,  if  they  do 
not  raise  the  salaries  of  officials.  The  condition  of  the  Indian 
officials  is  best  reflected  in  an  address^  by  Mr.  D.  R.  Lyall,  on 
the  occasion  of  the  reception  of  a  deputation  of  high  Indian 
officials  by  the  viceroy,  Lord  Landsdowne,  on  January  31,  1893, 
as  follows  : 

"This  disastrous  fall  in  the  value  of  the  currency  in  which 
the  officers  of  the  Indian  Government  are  paid  has  affected  all 
branches  of  the  Service  alike.  For,  although  the  conditions  of 
service  are  different  in  different  branches,  and  all  have  not  suf- 
fered in  precisely  the  same  manner  or  in  the  same  degree,  yet  the 
differences  are  insignificant  in  comparison  with  the  losses  which 

■  Question  2217. 

■'Minutes  of  Evidence,  Indian  Currency  Committee,  p.  186. 


76  INDIAN    SILVER    CURRENCY. 

all  have  suffered  in  common.  Since  1886,  when  the  depreciation 
of  silver  became  acute,  there  has  been  a  sharp  and  rapid  rise  in 
the  price  of  almost  all  articles  produced  in  India,  including  food, 
in  the  wages  of  servants,  and  in  house  rent.  In  the  same  period 
the  retail  price  of  goods  imported  from  Europe,  on  which  a  por- 
tion of  our  salaries  is  spent,  has  also  risen  largely  from  the  same 
cause ;  and  the  prices  paid  for  them  increase  with  each  successive 
fall  in  exchange. 

"We  do  not,  however,  desire  to  dwell  at  length  on  this  part 
of  the  case.  We  mention  it  in  order  to  show  that  the  fall  in  the 
value  of  silver  seriously  affects  us,  even  in  our  expenditure  in 
India.  What  we  wish  to  press  most  earnestly  upon  your  Excel- 
lency's attention  is  the  cruel  and  intolerable  burden  which  has 
been  laid  upon  us  in  respect  of  that  portion  of  our  expenditure 
which  has  to  be  incurred  at  home.  Your  Excellency  is  doubtless 
aware  that,  if  a  European  officer,  whether  soldier  or  civilian,  is  to 
render  efficient  service  to  Government  in  a  tropical  climate,  it  is 
necessary  for  him  to  take  leave  periodically  to  England  to  recruit 
his  health.  If  he  has  to  give  his  children  an  education  of  the 
same  stamp  as  he  has  himself  received,  he  must  send  them  to 
England  to  school.  If  he  is  to  lay  by  a  little  money  as  an  addi- 
tion to  his  pension  after  retirement,  or  as  a  provision  for  his 
widow  and  others  dependent  on  him  after  his  death,  he  must  be 
enabled  to  remit  it  to  the  country  in  which  it  will  be  spent.  All 
these  are  as  much  the  just  and  reasonable  necessities  of  his  posi- 
tion as  the  ability  to  provide  himself  with  food  and  clothing 
from  day  to  day.  Yet  it  is  the  literal  truth  that,  under  present 
conditions,  these  moderate  and  reasonable  requirements  are 
beyond  the  reach  of  many,  if  not  most  of  your  Excellency's 
European  officers,  and  are  becoming  increasingly  difficult  for  all. 

"We  will  not  weary  your  Excellency  with  a  long  list  of  actual 
instances.  A  single  typical  case  will  suffice.  We  will  take  the 
case  of  an  officer  whose  pay  is  Rs.  800  a  month,  and  who  has  a 
wife  and  two  or  three  children  to  support  at  home.  That  sum 
represents  the  pay  of  a  Senior  Chaplain,  of  a  second  grade  Dis- 
trict Superintendent  of  Police,  and  of  a  second  grade  Sub-Deputy 


COMPLAINTS    OF    OFFICIALS.  'J'J 

Opium  Agent ;  and  wc  would  explain  that,  on  the  Bengal  estab- 
lishment, the  average  length  of  service  of  the  ofificers  now  in 
those  grades  is  i6  years,  29  years,  and  28  years  respectively. 

"Such  an  officer's  remittances  to  his  family  cannot,  at  a  low 
estimate,  be  placed  at  less  than  ^400  a  year  if  his  children  are 
of  an  age  requiring  education.  At  the  present  rate  of  exchange, 
that  sum  costs  him  more  than  Rs.  6,500,  thus  leaving  him  Rs. 
258  a  month  for  subsistence.  After  deduction  of  fund  subscrip- 
tions and  income-tax,  he  is  left  with  less  than  Rs.  200  a  month 
to  live  on.  Even  in  the  case  of  men  who  have  been  fortunate 
in  their  promotion,  or  who  are  members  of  a  higher  paid  branch 
of  the  service,  and  who  receive  pay  of  Rs.  1000  a  month,  the  sum 
left  for  subsistence  in  India  would  amount  to  less  than  Rs.  400 
a  month,  after  deductions  as  above.  It  is  evident  that  such  men 
cannot  save  ;  in  fact,  it  is  difficult  for  them  to  keep  clear  of  debt. 
The  case  is  still  worse  if  the  Government  servant  falls  ill,  or  is 
for  other  reasons  compelled  to  take  leave.  His  maximum  fur- 
lough pay  is  then  Rs.  6000  a  year,  which  at  the  present  rate  of 
exchange  gives  him  only  ^367  a  year  on  which  to  maintain  him- 
self and  his  family  and  educate  his  children.  It  is  manifest  that 
the  prospect  of  having  to  subsist  on  such  an  allowance  goes  far 
towards  neutralizing  the  value  of  the  furlough  rules  in  the  case 
of  European  officers. 

"But  in  the  Indian  Staff  Corps,  and  in  most  of  the  large  Civil 
Departments  in  India,  an  officer  of  from  15  to  20  years'  service 
seldom  draws  so  much  as  Rs.  800  to  Rs.  lOOO  a  month.  After 
twenty  years'  service  an  officer  of  the  Staff  Corps  attains  the  rank 
of  Major,  and  receives,  with  allowances,  about  Rs.  900  per  month, 
while  as  a  Captain  his  pay  up  to  the  completion  of  his  twentieth 
year  is,  with  allowances,  less  than  Rs.  600  per  mensem.  In  the 
Public  Works  Department  the  rank  of  Executive  Engineer,  second 
grade,  which  is  reached  in  about  seventeen  years'  service,  carries 
a  pay  of  Rs.  800  per  month.  In  the  other  principal  European 
departments,  officers  of  from  1 5  to  20  years  service  are  com- 
monly in  receipt  of  salaries  not  exceeding  Rs.  600  to  Rs.  800 
per  month.     The  condition  of  these    services  is  being  subjected 


yS  INDIAN    SILVER    CURRENCY. 

to  a  complete  revolution  in  consequence  of  the  fall  in  exchange. 
Hitherto,  an  officer  entering  the  Staff  Corps,  or  one  of  the  great 
Civil  Departments,  expected  to  retain  his  connection  with  his  own 
country.  He  expected  to  be  able  to  send  his  children  home  to 
be  suitably  educated ;  to  take  furlough  to  England  from  time  to 
time  for  the  sake  of  his  health,  and  also  to  visit  his  relatives  and 
family  ;  and,  finally,  to  save  a  part  of  his  pay,  which,  added  to  his 
pension,  would  enable  him  to  live  in  comparative  comfort  after  his 
retirement.  These  just  and  reasonable  expectations  are  now 
defeated.  It  is  now  utterly  impossible  for  many  officers,  even 
those  who  have  been  fortunate  in  their  promotion,  to  afford  the 
expense  of  educating  their  children  at  home.  Every  year  men 
are  being  driven  in  increasing  numbers  to  send  their  sons  and 
daughters  to  hill  schools,  to  deny  themselves  and  their  wives  the 
advantage  of  a  periodical  visit  to  their  own  country,  and  to 
relinquish  all  expectation  of  saving  a  little  money  to  eke  out 
their  pensions  when  they  retire.  Year  by  year  it  is  becoming  plain 
that  a  larger  and  larger  proportion  of  the  men  who  accept  Gov- 
ernment service  in  India  must  abandon  the  hope  of  ever  returning 
home.  They  must  be  content  to  settle  permanently  in  India; 
while  their  children,  receiving  an  inferior  education  and  brought 
up  amid  un-English  surroundings,  sink  to  a  lower  social  level, 
and  swell  the  mass  of  the  unemployed  white  population,  whose 
growth  is  already  a  source  of  grave  anxiety. 

"  It  is  impossible  to  look  for  the  indefinite  continuance  of 
faithful  and  contented  work,  when  the  workers  are  placed  in  a 
position  of  anxiety  and  embarrassment  deepening  into  despond- 
ency. There  is  happily  as  yet  little  cause  to  fear  that  any  of 
those  whom  we  represent  may  be  led  to  fall  away  from  the  high 
standing  of  which  both  the  Indian  Government  and  its  servants 
are  justly  proud.  But  your  Excellency  will,  we  are  assured,  be 
alive  to  the  necessity  of  placing  even  the  humblest  of  your  Euro- 
pean officers  byond  the  reach  of  temptation.  And  as  it  becomes 
more  generally  known  that,  to  the  disadvantages  inseparable 
from  an  Indian  career,  there  must  now  be  added  the  prospect  of 
poverty  so  great  as  to  involve  the  possible  severance  of  home 


COMPLAINTS    OF    OFFICIALS.  79 

ties,  it  can  scarcely  be  doubted  that  Her  Majesty's  Secretary  of 
State  will  find  it  increasingly  difficult  to  obtain  fresh  recruits  for 
the  Indian  Services  of  the  same  stamp  as  at  present. 

"Officers  of  the  Civil  Service  and  the  Staff  Corps  are  now 
beginning  to  find  that  their  pensions  after  retirement,  which  are 
fixed  in  sterling,  are  worth  almost  as  much  as  their  salaries  during 
active  service,  which  are  payable  in  rupees.  These  officers  have 
thus  every  inducement  to  retire  as  soon  as  they  have  completed 
the  minimum  periods  of  service  required  by  the  rules,  thereby 
prematurely  swelling  the  pension  list,  and  impairing  the  efficiency 
of  the  public  service  by  the  early  withdrawal  of  experienced  offi- 
cers still  capable  of  active  work.   .   .   . 

"We  j)ray  your  Excellency  to  take  these  matters  into  your 
favorable  consideration,  and  secure  for  us  such  an  adjustment  of 
our  salaries,  as  will  make  them  not  less  valuable  to  us  than  they 
were  intended  to  be  when  they  were  fixed.  In  Ceylon,  we  under- 
stand that  the  pay  of  the  civil  servants  of  the  Colony  was  fixed 
several  years  ago  at  the  rate  of  is.  io}^d.  to  the  rupee.  We  do 
not  wish  to  define  the  precise  form  in  which  similar  assistance 
might  most  suitably  be  granted  to  Her  Majesty's  Indian  servants  ; 
but  would  beg  your  Excellency  to  believe  that  we  have  not  exag- 
gerated our  distress,  and  to  grant  to  us  the  fullest  measure  of 
relief,  in  such  manner  as  your  Excellency's  advisers  may  think 
fit." 

Lord  Roberts,  the  commander-in-chief  of  the  Indian  Army, 
expressed  himself  to  the  same  effect  as  Mr.  Lyall,  in  a  memoran- 
dum '  addressed  to  the  viceroy  on  the  occasion  of  the  reception 
of  the  above-mentioned  deputation,  on  the  hardships  to  the  Indian 
officials  arising  from  the  fall  in  the  rate  of  exchange. 

The  question  of  raising  the  salaries  of  officers  also  has  a  very 
grave  political  side.  No  one  goes  for  pleasure  alone  into  the 
fever  districts  of  Lower  Bengal,  or  into  the  deserts  of  Rajputana 
as  a  revenue  officer,  or  as  a  judge  ;  if  a  highly  tempting  salary  is 
not  offered,  the  government  simply  finds  no  one  fit  for  the  posts. 
To  the  present  time,  the  services  of  the  Anglo-Indian  adminis- 

'  Appendix  to  Minuses  of  Evidence,  Indian  Currency  Committee,  p.  189. 


80  INDIAN    SILVER    CURRENCY. 

tration  have  been  unmistakably  brilliant.  The  country  is  admira- 
bly governed.  "There  is  no  other  country  in  the  world  which, 
under  equally  difficult  conditions,  would  be  governed  equally 
well."  '  Although  only  lOO  years  ago  fire  and  sword,  destruction 
and  war  were  the  order  of  the  day,  there  now  reigns  throughout 
the  length  and  breadth  of  the  empire,  from  Cape  Comorin  to  the 
snow-bound  peaks  of  the  Himalayas,  from  the  boundaries  of 
Afghanistan  to  the  coast  of  Coromandel,  the  pax  britannica,  the 
most  profound  peace.  Justice  prevails  everywhere,  and  the 
country  is  developing  economically  in  a  decidedly  wonderful 
manner.  Everywhere,  the  English  official  in  India  to  the  pres- 
ent day  stands  as  the  model  of  honesty  and  integrity  and  the 
possessor  of  an  admirable  tact.  And,  for  pecuniary  considera- 
tions should  the  government  invite  the  risk  of  this  becoming 
otherwise?  No,  —  it  is  of  vital  interest  to  the  country  that  the 
integrity  of  the  officials  should  be  protected  by  a  sufficient  com- 
pensation. Should  it  be  otherwise,  that  would  be  the  beginning 
of  the  end. 

»  Ruhland,  loc.  cit.,  p.  224. 


CHAPTER  IV. 

HISTORY  OF  THE  INDIAN  SILVER  CURRENCY. 

I.    THE    EARLIER    TIMES    TO     1835. 

Silver,  gold,  and  copper  were  the  metals  used  in  the  earliest 
Indian  monetary  system  ;  and,  as  was  universal  in  the  beginning, 
when  metallic  money  was  adopted  the  fine  metal  was  weighed 
out  in  payments.'  The  unit  of  weight  was  the  rati,  of  1.75 
grains  troy,  whose  weight  was  equivalent  to  that  of  the  seed  of 
the^  bnis  precatorius ;  lOO  ratis  formed  the  sata-raktika  in  common 
use ;  and  this  weight  of  money  can  not  only  be  traced  back  to 
the  time  of  the  Vedas,  but  it  also  formed  the  basis  for  the  devel- 
opment of  the  modern  British  rupee. 

Silver  was  from  the  beginning  the  money-metal  most  in  use 
in  India,  although  gold,  especially  in  the  south,  played  no  unim- 
portant role.  For  this  reason  we  intend  to  treat  of  the  silver 
money  first. 

A.     THE    SILVER    MONEY. 

Sher  Shah  chose  the  above  mentioned  money-weight  of  lOO 
ratis,  in  1542,  as  a  basis,  when  he  coined  his  rupyam  (silver  coin) 
containing  about  176  grains  of  silver.  Many  local  rupees  fol- 
lowed this  first  one,  all  different  in  weight  and  fineness.  The 
first  English  rupee  was  the  "rupee  of  Bombay,"  in  the  year  1677, 
weighing  167.8  grains.  In  1600,  Queen  Elizabeth  had  caused 
"portcullis  pieces  of  eight"  to  be  coined,  in  order  that  her  face 
should  be  as  highly  esteemed  in  distant  Asia  as  that  of  the  Span- 
ish king.  By  1758,  before  the  British  power  was  permanently 
established,  English   rupees  were   coined  in  only  limited  quanti- 

'  The  statements  to  p.  85  are  almost  entirely  borrowed  from  Chalmers,  History 
of  Currency  in  the  British  Colonies,  p.  336.  See,  further,  Laughlin,  "  Indian  Monetary 
History,"  and  Molesworth,  Indian  Currency. 

81 


82  INDIAN    SILVER    CURRENCY. 

ties.  Before  1835  there  were  three  principal  kinds  of  rupees,  the 
sicca-rupee  in  Bengal,  the  surat-rupee  in  Bombay,  and  the  arcot- 
rupee  in  Madras. 

(a)  From  1773  on,  in  order  to  prevent  the  clipping  by  the 
money-changers,  the  sicca-rupee  of  Bengal  was  provided  with  an 
inscription  "  19  San  Sikkah  "  {i.  e.,  coined  in  the  19th  year  of  Shah 
Alam,  the  last  of  the  Moguls).  This  coin  containing  in  gross 
weight  about  180  grains  and  of  fine  silver  about  176  grains, 
remained  in  circulation,  with  slight  change,  until  their  coinage 
was  stopped  by  Act  XIII.  of  1836.  Since  January  i,  1838,  the 
sicca-rupee  has  not  been  a  legal  means  of  payment. 

(b)  The  old  Bombay  rupee  was  somewhat  lighter  than  the 
sicca-rupee,  although  containing  more  fine  silver.  The  surat- 
rupee  of  the  natives  was  intended  to  be  of  like  weight  and  fine- 
ness. But,  since  it  was  coined  of  less  value,  it  drove  the  English 
coins  out  of  circulation  ;  hence  in  the  last  twenty  years  of  the  pre- 
ceding century  none  of  the  Bombay  rupees  were  coined.  In  1*^81 
a  new  Bombay  rupee  was  ordered  to  be  coined  of  1 79  grains  gross 
weight  and  about  165  grains  fine  weight,  or  about  the  present 
proportion.  In  1824  Bombay  adopted  the  coinage  system  of 
Madras. 

(c)  Before  18 18  the  arcot-rupee  of  Madras,  which  was  struck 
at  the  mint  of  Fort  St.  George,  contained  166.477  grains  of  fine 
silver.  Because  the  gold  was  valued  too  highly  as  compared  with 
silver,  and  because  of  the  coinage  of  a  domestic  arcot-rupee  of 
less  value,  the  silver  rupee  could  have  but  little  importance  in 
comparison  with  the  gold  pagoda  Tind  fanam,^  a  small  native  silver 
coin  rated  higher  than  the  British  rupee. 

In  1806,  it  was  ordered  by  England  that  the  current  coin  of 
Madras  should  be  a  silver  rupee  of  a  gross  weight  of  180  grains, 
W  fine,  and  so  containing  165  grains  fine  silver.  But  the  new 
coin  was  not  introduced  until  a  proclamation  was  issued  January 
7,  I  818;   and  350  rupees  were  to  equal  100  pagodas. 

(d)  Although  the  Company  intended  to  introduce  a  uniform 
coinage,  as  early  as  1806,  into  all  their  Asiatic  possessions,  this 

'  Fanam  is  probably  the  Arabian  expression  for  the  Tamil  word,  panam  (money). 


HISTORY    OF    THE    INDIAN    SILVER    CURRENCY.  83 

purpose  was  not  effected  until  a  generation  later.  By  1806, 
under  the  influence  of  Lord  Liverpool's  Letter  to  the  King,  they 
had,  as  is  distinctly  admitted,  decided  upon  nionometalism  ;  and 
only  silver  could  be  the  money  metal.  But  it  was  only  by  Act 
XVIL  of  1835,  that  a  uniform  silver  rupee,  and  the  correspond- 
ing pieces  of  half-rupees,  were  introduced  throughout  all  India 
as  the  legal  means  of  payment.  The  type  chosen  for  the  new 
company  rupee  was  the  Madras  rupee  of  1818,  containing  180 
grains  troy  of  gross  weight  and  165  grains  of  fine  silver;  it  was, 
as  stated  above,  introduced  into  Bombay  in  1824.  Since  1862 
the  rupee  has  been  provided  with  the  effigy  of  the  Queen  instead 
of  the  escutcheon  of  the  East  India  Company  ;  and  since  then  it 
is  called  "the  Government  rupee." 

B.    GOLD. 

(«)    THE  MOHUR. 

Like  the  silver  rupee,  the  gold  mohur  (Persian  ;/w/<fr  means 
seal)  has  the  old  Indian  weight  of  lOO  ratis,  or  175  grains  fine 
gold.  In  the  fourteenth  century  a  mohur  of  about  300  grains 
was  coined  for  a  time,  —  apparently  in  order  to  approximate  to 
the  then  existing  relation  between  silver  and  gold,  but  they 
later  returned  to  the  old  weight  of  the  sata-raktika.  After  1758 
the  East  India  Company  endeavored  to  make  gold  the  mone- 
tary standard  in  India. 

"Under  the  native  governments"  (Ordinance  XXXV.  of  Ben- 
gal in  1793),  "and  until  the  year  1766,  the  gold  mohur  was  not 
adopted  as  a  legal  means  of  payment  in  public  or  private  obliga- 
tions, nor  had  the  government  fixed  the  number  of  rupees  to 
which  it  was  to  be  equal.  It  was  only  coined  for  the  convenience 
of  certain  individuals,  and  its  market  price  was  affected  by  fluc- 
tuations like  those  of  other  goods,  for  silver  was  the  common 
measure  of  value  throughout  the  country.  In  1766  the  gold 
mohur  was  declared  to  be  a  legal  means  of  payment ;  it  was  to 
be  equal  to  14  sicca-rupees.  This,  however,  did  not  correspond 
to  the  market  ratio;  hence  in  1769  the  value  of  the  gold  mohur 
was  fixed  at  16  sicca-rupees.     This  was  another  error. 


84  INDIAN    SILVER    CURRENCY. 

In  Bombay  it  was  ordained,  in  1774,  that  a  gold  mohur 
should  be  struck  of  the  weight  of  the  silver  rupee  and  of  the 
fineness  of  the  Venetian  zecchino ;  hence  the  ratio  was  about  1:15. 
When  the  surat-rupee  came  into  circulation  the  ratio  was 
changed  to  1:13.  In  order  to  obtain  relief,  it  was  enacted  in 
1800  that  the  gold  mohur  should  have  the  same  gross  and  fine 
weight  as  the  silver  rupee,  and  should  be  equivalent  to  15  silver 
rupees. 

Ordinance  XLV.  of  Bengal,  in  1803,  expressly  declared  the 
gold  mohur  to  be  the  money  of  trade.  In  1806,  when  they  were 
discussing  the  introduction  of  a  uniform  standard  in  India,  the 
coinage  of  a  gold  rupee  of  180  grains  troy  gross  weight  and  165 
grains  fine  weight  was  proposed.  This  was  done,  in  181 8,  in 
Madras,  where  the  gold  rupee  was  received  and  paid  out  at  all 
public  treasuries  "at  a  rate  fixed  by  a  proclamation  of  the  gov- 
ernment. The  present  ratio  of  one  gold  rupee  for  15  silver 
rupees  shall  continue  until  changed  by  a  new  proclamation."  In 
Bengal,  Ordinance  XIV.,  of  181 8,  decreed  that  the  gold  mohur, 
reduced  to  a  fineness  of  22  carats,  should  be  worth  16  silver 
rupees. 

When  the  principles  of  1806  were  adopted  in  India  in  the 
year  1835,  -^^t  XVII.  of  that  year  said:  "That  no  gold  coins 
shall  henceforth  be  a  legal  means  of  payment  in  any  of  the  pos- 
sessions of  the  East  India  Company." 

{b)    THE    PAGODA. 

The  gold  coin  of  southern  India  is  a  native  varälia  or  Imn. 
The  first  name  means  the  boar  of  Vishnu,  which  has  been 
stam])cd  on  the  coins  of  southern  India  since  the  fifth  or  sixth 
century  under  the  Chalukya  dynasty  ;  hnn  (gold)  is  the  later 
Mahommedan  name.  From  the  sixteenth  century  on,  if  not 
somewhat  earlier,  the  Portuguese  gave  to  this  coin  the  name  of 
pardao  dc  ouro. 

In  Madras,  before  1818,  the  current  coin  was  a  star-pagoda, 
—  its  device  being  a  star ;  it  contained  42.048  grains  of  fine  gold 
and  was  worth  7s.  S^d-     This   pagoda,  as  well   as  some  other 


HISTORY    OF    THE    INDIAN    SILVER    CURRENCY.  8$ 

South-Indian  gold  coins  of  like  name  (the  Pondicherry  and 
and  Porto-Novo  pagodas)  which  differ  but  slightly  from  the 
Madras  pagoda,  were  used  in  Ceylon  and  Mauritius,  and  even  at 
the  Cape  of  Good  Hope  and  St.  Helena.  In  1800  the  pagoda 
was  declared  a  legal  tender  in  New  South  Wales. 

In  1806,  when  the  directors  of  the  East  India  Company  were 
discussing  the  reform  of  the  Indian  monetary  system  and 
decided  upon  the  silver  standard,  it  was  then  felt  that  some 
modifications  were  necessary  "in  Madras,  where  gold  is  the 
principal  money  in  circulation  and  the  money  of  account,  and 
in  which  the  troops  are  mostly  paid.  Not  in  the  least  is  it 
our  wish  to  introduce  a  silver  standard  to  the  exclusion  of  gold, 
where  the  latter  is  the  common  measure  of  value." 

In  1810  the  minting  of  gold  coins  was  restricted;  their  pay- 
ing power  was  likewise  limited.  By  proclamation  of  January  7, 
1 8 1 8,  the  new  silver  rupee  was  introduced  as  the  legal  means  of  pay- 
ment in  the  Presidency  and  the  coinage  of  pagodas  stopped  ; 
instead  of  that,  as  above  mentioned,  the  coinage  of  a  gold  rupee 
was  ordered,  and  its  equivalent  in  silver  at  the  treasury  was 
given. 

II.    ATTEMPTS    AT    REFORM    SINCE     1 83  5. 

We  saw  that,  in  1835,  ^^^^  simple  silver  standard  was  intro- 
duced into  British  P2ast-India.  Soon  after  that,  however, 
attempts  were  begun  to  again  make  a  place  for  gold  in  the 
Indian  coinage  system.  The  first  step  was  taken  in  the  procla- 
mation of  January  13,  1841,  in  which  the  public  treasuries  were 
instructed  to  receive  the  gold  mohur  in  payment  for  15  ru[)ees. 
The  gold  mohurs,  whose  coinage  was  by  Act  XVII.  of  1835  thence- 
forth permitted,  thereby  became  a  legal  payment  at  the  treasury. 
Yet  almost  no  gold  was  coined  ;  and  although  the  charge  for 
seigniorage  was  lowered,  by  1847  there  was  scarcely  any  gold  in 
circulation.  When  the  Californian  and  Australian  gold  dis- 
coveries came,  a  depreciation  of  gold  began  to  be  feared,  and 
hence,  by  ordinance  of  December  22,  1852,  the  right  to  pay 
gold  coins  at  the  treasuries  was  withdrawn  from  January  i,  1853. 

But  when,  in  the  beginning  of  the  sixties,  in   consequence  of 


86  INDIAN    SILVER    CURRENCY. 

the  "cotton  famine";  the  imjjortation  of  the  precious  metals  to 
India  rose  enormously,  the  Chambers  of  Commerce  of  Bombay 
and  Madras  believed  the  time  had  arrived  to  begin  an  energetic 
agitation  in  favor  of  introducing  the  gold  standard.  While  the 
Chamber  of  Madras,  however,  in  its  address  to  the  vicerov  of 
April  30,  1864,  limited  itself  to  pointing  out  the  inconveniences 
occasioned  to  merchants  by  large  payments  in  silver  —  since  the 
adoption  of  paper  money  had  made  no  progress  —  their  col- 
leagues in  Bombay  were  more  plain-spoken.  It  is  both  enter- 
taining and  interesting  to  read  the  address'  of  this  Chamber  on 
the  eighth  and  nineteenth  of  February  1864. 

In  a  report  it  is  said  "that  the  exclusion  of  gold  from  our 
currency  cannot  be  justified,  and  that  this  must  be  regarded 
simply  as  barbarous,  irrational  and  unnatural."  They  argued 
that  from  time  immemorial  India  had  possessed  a  gold  standard 
until  the  coinage  law  of  1835  had  robbed  gold  of  its  property  as  a 
legal  means  of  payment.  But  gold  could  not  thereby  have  lost 
its  popularity;  on  the  contrary  gold  coins  are  still  much  sought 
for,  and  a  high  premium  is  paid  for  them.  The  report  goes  on  to 
say  "that  the  continued  movement  of  silver  to  India  must  bring 
disturbance,  if  not  destruction,  to  the  silver  standards  of  all 
other  nations,  and  that  it  is  to  the  interest  of  India  as  well  as  of 
all  the  rest  of  the  world,  that  the  movement  which  causes  this 
exhaustion  should  be  removed  by  the  introduction  of  a  gold 
standard."  The  chamber  moved  in  favor  of  appointing  a  com- 
mission. Their  resolutions  were  warmly  supported  by  the  gov- 
ernor of  Bombay  in  a  report  dated  February  23,  1864.  Then 
on  November  23,  1864,  legal  tender  power  at  the  treasury  was 
granted  to  the  English  sovereign  at  the  rate  of  10  rupees  and  to 
the  half-sovereign  for  5  rupees. 

The  desire  for  a  gold  currency,  to  which  the  Chamber  of 
Commerce  at  Calcutta  gave  renewed  expression,  led  to  the 
appointment  of  the   Mansfield  Commission  ^^  which  reported  on 

^Papers  relating  to  a  Gold  Currency  for  India,  1864,  pp.  5  and  7. 
^  Chalmers,  loc.    cit.,  p.   344.     J.    L.    Laughlin,  loc.    cit.^    593.     Report  from  the 
Royal  Commission  on  International  Coinage,  London,  1868.     Questions  297  et  seq. 


HISTORY    OF    THE    INDIAN    SILVER    CURRENCY.  87 

October  4,  1866,  on  the  monetary  system  of  India,  and  recom- 
mended the  use  of  gold  as  a  legal  means  of  payment,  making  the 
gold  mohur  worth  i  5  ru[)ces.  Thereupon  the  Government  pro- 
claimed that  it  was  intended  to  receive  the  British  sovereign  at  the 
public  offices  at  the  rate  of  10  rupees  4  annas.  The  change  in 
the  relative  values  of  the  two  metals,  however,  which  followed  a 
few  years  after,  did  not  permit  this  ordinance  to  be  of  any  prac- 
tical value. 

But  when  the  depreciation  of  silver  began,  and  when  w^ith  it 
the  rate  of  exchange  fell,  the  Indian  Government,  being  now 
obliged  to  furnish  more  and  more  silver  to  meet  their  gold  obli- 
gations, came  to  feel  the  new  hardships  in  the  most  unpleasant 
manner.  Hence,  in  1878,  Lord  Lytton  submitted  propositions 
to  the  British  Government  looking  to  an  increase  of  the  rate  of 
exchange  from  is.  7d.  to  2s.,  by  a  limitation  of  the  coinage  and 
by  an  addition  to  the  mint  value  of  the  rupee,  thereby  establish- 
ing a  fixed  ratio  between  gold  and  the  coined  silver  rupees.  The 
British  Government  abruptly  declined  this  proposition. 

At  the  Paris  Monetary  Conference  of  1881,  the  Indian  Gov- 
ernment was  represented  by  two  bimetallists,  Lord  Reay  and  Sir 
Louis  Mallet.  At  this  conference,  however,  as  is  well  known, 
nothing  was  accomplished. 

Meanwhile  the  financial  condition  of  the  Indian  Government 
became  more  and  more  troublesome.  In  its  despatch  of  February 
2,  1886,  the  Council  of  the  viceroy,  represented  to  the  Secretary 
of  State  for  India,  then  Lord  Randolph  Churchill,  the  extraor- 
dinary importance  an  international  regulation  of  silver  would 
have  for  India.  Before  that,  on  January  26,  the  India  Office  had 
addressed  a  letter  to  the  Lord  Commissioners  of  the  Treasury, 
saying:  The  Secretary  of  State  cannot  hesitate  to  afifirm  "that 
there  is  an  urgent  necessity  for  making  every  possible  effort  to 
find  a  means  of  freeing  the  Indian  Government  from  their  present 
condition;  and  that  a  comparative  steadiness  in  the  relative 
values  of  gold  and  silver  would  be  important  for  the  regular 
movement  of  trade,  yea,  even  of  most  vital  interest  to  India." 
The  Treasurv  Office  answered,  under  date  of   May  31,  1886,  the 


88  INDIAN    SILVER    CURRENCY. 

despatch  of  the  Indian  Government  and  the  letter  of  the  India  Office, 
that  they  could  adopt  no  measures  to  promote  a  monetary  confer- 
ence and  take  part  therein  before  a  policy  was  adopted  which  they 
could  follow  and  approve  of ;  especially,  as  the  whole  question 
is  being  considered  by  the  Royal  Commission  on  the  Depression 
of  Trade  and  Industry  ;  and,  finally,  nothing  exists  which  could 
induce  the  Lords  Commissioners  of  the  Treasury  to  deviate  from 
the  instructions  given  to  the  representative  of  England  at  the 
Monetary  Conference  of  1881.  These  were  to  the  effect  that 
the  English  delegate  should  simply  attend  the  discussions,  in 
order  to  make  communications  and  furnish  information  which 
the  Conference  might  require,  but  he  should  have  no  permission 
to  vote. 

The  liberal  successor  to  Lord  Randolph  Churchill  did  not  con- 
tinue the  discussion  with  the  Treasury  Office.  In  the  meanwhile, 
the  Tories  again  came  into  power,  and  in  September  1886  a  Royal 
Commission  was  again  appointed  for  the  investigation  of  the 
recent  changes  in  the  relative  values  of  the  precious  metals  (Gold 
and  Silver  Commission).  The  Indian  Government  under  Lord 
Dufferin  laid  before  this  commission  a  scheme  worked  out  in 
detail,'  requiring  the  double  standard  for  both  England  and  India. 
The  ratio  to  be  chosen  should  not  be  less  than  the  average  price 
of  both  the  precious  metals  in  the  markets  of  the  world  during 
recent  years,  and  not  more  favorable  for  silver  than  1:15^.  The 
Gold  and  Silver  Commission,  however,  resulted  in  no  success ; 
and,  for  Indian  interests,  no  step  was  taken. 

The  price  of  silver  continued  to  fall  steadily.  The  sudden 
and  striking  rise  in  consequence  of  the  American  silver  experi- 
ment in  the  year  1890  was  only  a  short  interruption.  Worse  and 
worse  became  the  condition  of  the  government  and  of  all  the 
interests  injured  by  the  decline  of  silver. 

At  the  end  of  January,  1892,  came  the  news  that  the  United 
States  of  North  America  intended  to  invite  the  other  powers  to  a 
new  monetary  conference.  Thereupon  the  Chamber  of  Com- 
merce of  Bombay,  in  two  communications  to  the  Indian  Govern- 

'  Appendix  XII.,  First  Report  of  the  Gold  and  Silver  Commission. 


HISTORY    OF    THE    INDIAN    SILVER    CURRENCY.  89 

mcnt  on  February  4  and  18,  pointed  out  how  absolutely  necessary 
it  is  for  India  that  the  international  double-standard  should  be 
determined  upon  at  the  forthcoming  conference,  and  then  fully 
carried  out ;  but  that,  if  no  understanding-  should  be  reached  on 
this  point,  the  introduction  of  the  gold  standard  should  be  taken 
into  serious  consideration.  The  Indian  Government  transmitted 
these  communications  to  the  Secretary  of  State,  and  also  pointed 
out  the  extremelv  dangerous  effect  on  India  of  the  exjjected 
suspension  of  silver  purchases  by  the  United  States. 

Upon  the  announcement  that  Great  Britain  had  accepted  the 
invitation  to  the  conference,  yet  that  it  would  not  discuss  inter- 
national bimetallism,  but  only  the  more  extended  use  of  silver 
for  purposes  of  money,  the  Indian  Government  decided  to  recom- 
mend that,  in  case  a  direct  agreement  between  the  United  States 
and  India  was  not  feasible,  the  Indian  mints  should  be  closed  to 
the  free  coinage  of  silver,  although  the  government  itself  should 
retain  the  right  to  coin.  If  they  had  foreseen  what  effect  the 
closing  of  the  mints  has  had  on  the  gold  value  of  the  rupee,  they 
should  have  opened  the  mints  to  the  free  coinage  of  gold  ;  the 
establishment  of  a  ratio  between  the  gold  and  the  silver  rupee 
might  have  been  reserved  for  further  deliberation.  The  best 
ratio  would  probably  be,  that  which  corresponded  to  the  market 
conditions  during  a  limited  period  before  the  introduction  of  the 
limping  gold  standard.  At  the  same  time,  the  Minister  of 
Finance,  Sir  D.  M.  Barbour,  transmitted  to  the  India  Ofifice  a 
detailed  statement  which  is  of  the  highest  importance.  It  forms 
the  basis  of  all  the  discussions  concerning  Indian  currency  affairs 
to  the  time  of  the  closing  of  the  mints,  and  we  are  probably  right 
in  supposing  that,  so  far  as  conditions  allow,  it  is  to  be  decisive 
for  the  future  policy  of  the  Indian  Government. 

We  shall  reprint  the  statement  verbatim  in  the  appendix.  A 
brief  reference  to  it  here  is  sufficient.  Sir  David  first  remarks 
that,  although  the  proposal  aims  to  stop  the  free  coinage  of  sil- 
ver and  introduce  the  gold  standard,  there  is  no  intention  to  put 
gold  in  the  place  of  silver  in  the  ordinary  circulation  of  the 
countrv.      For,  in  the  great  majority  of  Indian  transactions,  silver 


90  INDIAN    SILVER    CURRENCY. 

must  remain  the  medium  of  exchange.  He  relies  on  the  exam- 
ple of  France  and  other  nations  to  show  that  a  limping  gold 
standard  with  a  very  extended  use  of  overvalued  silver  coins  can 
very  well  be  maintained.  He  emphasizes  that,  in  order  to  make 
the  limping  gold  standard  effective,  it  is  necessary  to  limit  the 
quantity  of  these  silver  coins.  These  silver  coins  must  be 
exchangeable  at  any  time  for  gold  coins,  either  on  the  payment 
of  a  slight  premium,  or  without  it.  As  a  rule  it  is  to  be  expected 
that  gold  would  be  required  for  silver  coins  only  when  gold  is  wanted 
for  hoards,  for  export,  or  for  melting.  A  possibility  of  accom- 
plishing this  purpose,  in  his  opinion,  exists  in  gathering  a  supply 
of  gold;  then  —  when  enough  gold  is  on  hand  —  in  opening  the 
mints  to  the  free  coinage  of  gold,  in  making  this  metal  thereafter 
legal  tender,  and  in  guaranteeing,  by  the  gold  reserve  collected, 
the  exchangeability  of  silver  and  gold  coins  at  their  face  value.' 
This,  however,  would  be  a  very  costly  plan,  and  there  exists  the 
great  danger  that  the  whole  supply  of  gold  would  disappear  in 
exchange  for  silver  coins.  For  this  reason.  Sir  David  Barbour 
did  not  recommend  this  plan,  but  the  one  mentioned  above,  which 
the  Government  has  made  its  own.  If  this  last  plan  should  be 
carried  out,  and  the  Government  treasury  be  instructed  to  exchange 
gold  coins  for  silver  rupees,  as  soon  as  such  an  order  was  possi- 
ble, then  no  premium  of  any  amount  whatever  on  gold  coins 
could  exist,  so  long  as  the  reserves  should  be  maintained  in  the 
public  treasuries  or  in  that  behind  the  paper  money ;  and  the 
limping  gold  standard  would  remain  absolutely  intact. 

After  carrying  out  the  proposed  measures,  it  might  be  pos- 
sible that  no  gold  would  be  brought  to  the  mint  or  put  in  circu- 
lation, and  that  the  value  of  the  rupee  should  fall  below  is.  4d. — 
accepting  this  as  the  established  relation, — or  that  gold  would  be 
brought  to  be  coined  only  so  long  as  the  rupee  should  be  worth 
IS.  4d.;  but  that  this  then  might  cease,  and  the  value  of  the 
rupee  would  fall.  This  would  then  be  a  sign  that  too  many 
silver    rupees    were    in    circulation,    and    that   the   limping   gold 

'  English  "  face  value  "  means  the  number  of  rupees  stated  on  the  face  of  the  gold 


HISTORY    OF    THE    INDIAN    SILVER    CURRENCY.  9I 

standard  would  no  longer  remain  intact.  The  remedy  in  .such  a 
case  would  be  to  limit  the  circulation  of  rupees  and  take  meas- 
ures to  improve  the  general  financial  condition  of  the  country. 
Such  an  improvement  would  give  heightened  confidence ;  and 
the  reduction  in  the  quantity  of  rupees  in  circulation,  if  carried 
far  enough,  would  finally  raise  the  value  of  these  coins.  The 
greatest  danger  would  probably  arise,  immediately  after  the  first 
introduction  of  the  limping  gold  standard,  from  the  rupees 
which  would  return  to  India  from  abroad,  and  from  those  which 
would  be  drawn  from  hoards  and  be  put  into  circulation ; 
although  Mr.  Barbour  believes  that  the  hoards  would  in  reality 
remain  practically  undisturbed.  The  limitation  of  the  rupees  in 
circulation  would  not  necessarily  be  an  expensive  measure ;  it 
could  be  extended  over  a  series  of  years.  But  until  it  was  car- 
ried out  to  a  sufificient  extent,  the  limping  gold  standard  could 
not  be  introduced.  It  might  be  hoped,  however,  that  during  the 
transition  period  the  rate  of  exchange  between  England  and 
India  would  become  steadier  than  it  had  been  up  to  the  present 
time.  That  Sir  David  Barbour,  at  the  close  of  his  statement, 
should  advocate  international  bimetallism  is  very  natural,  and 
corresponded  with  the  traditional  policy  of  the  Indian  Govern- 
ment. The  latter,  of  course,  has  an  exceptionally  strong  interest 
in  raising  the  price  of  silver,  and  they  would  like  it  very  well  if 
other  countries,  with  no  large  silver  interests,  should  help  them 
out  of  their  evil  situation.  Whether  these  other  nations  are 
seriously  injured  by  experiments  in  raising  the  price  of  silver,  is 
a  matter  of  utter  indifference  to  India. 

Meanwhile,  a  very  energetic  agitation  in  favor  of  the  intro- 
duction of  the  gold  standard  was  begun  in  India  in  consequence 
of  the  Brussels  conference  and  the  threatened  cessation  of  silver 
purchases  by  the  United  States.  In  May  1892,  the  hidian  Cur- 
re?icy  Associatiofi  was  founded,  which  soon  spread  over  the  entire 
empire.  A  petition  of  this  organization  to  the  House  of  Com- 
mons, in  which  they  prayed  for  the  substitution  of  a  gold  instead 
of  a  silver  standard,  obtained  11,788  signatures,  5289  being 
Europeans  and  6489   being  natives.     In   different  places  —  as  in 


g2  INDIAN    SILVER    CURRENCY. 

Kurrachee  and  Bombay  —  the  first  native  firms  addressed  the 
Government,  begging  earnestly  to  be  freed  from  a  condition 
which  had  become  precarious  because  of  the  conditions  of  the 
currency. 

But  especially  active,  as  they  always  were  in  this  question, 
were  the  officials  of  the  civil  service  and  the  officers.  From 
September  21,  1892,  to  May  3,  1893,  the  Government  received 
not  less  than  1732  addresses  from  employees  who  complained  of 
the  difficulties  caused  them  by  the  depreciation  of  silver ;  and 
they  were  the  leaders  in  the  Currency  Association. 

Very  little  opposition  appears  to  have  arisen  in  India  against 
the  proposed  measure,  at  least  it  did  not  produce  any  such  agi- 
tation as  the  efforts  of  the  Currency  Association.  Only  two 
communications  were  laid  before  the  Herschell  committee  which 
opposed  the  proposed  scheme,  one  from  the  Darjeeling  and  Terai 
Tea  Planters'  Association,  and  another  from  the  United  South- 
Indian  Planters'  Association.  The  great  mass  of  the  people 
remained  quite  passive,  chiefly  for  the  reason,  probably,  that  they 
were  completely  ignorant  of  the  question. 

This  time,  the  efforts  aimed  at  a  change  of  the  standard  were 
more  successful  than  formerly.  For  it  was  the  circles  most 
influential  in  Indian  politics — the  Anglo-Indian  officials,  the 
cotton  manufacturers  of  Lancashire,  chiefly  the  English  firms 
interested  in  exporting  to  India  —  who  resorted  to  every  effort 
to  make  the  Indian  currency  independent  of  the  fate  of  silver. 
In  consequence  of  the  impossibility  of  making  an  approximately 
correct  budget,  and  of  the  threatened  chronic  deficits,  the  con- 
dition of  the  Indian  Government,  unless  the  price  of  silver 
improved,  would  be  very  bad  ;  furthermore,  since  no  one  could 
know  what  developments  would  follow  the  expected  cessation  of 
silver  purchases  by  the  United  States,  the  British  Government 
assented  to  the  appointment  of  a  commission  to  investigate  the 
conditions  of  the  Indian  currency. 

On  October  21,  1892,  the  Secretary  of  State  for  India,  Earl 
Kimberley,  ordered  the  appointment  of  a  committee.  The  Lord 
High    Chancellor,    Lord    Herschell,    was   named    as    chairman ; 


HISTORY    OF    THE    INDIAN    SILVKK    CURRENCY.  93 

besides  him,  the  committee  consisted  of:  Mr.  Leonard  Courtney, 
M.  P.;  Sir  Thomas  Farrer  ;  Sir  Reginald  Welby,  Secretary  of  the 
Treasury  Oflfice ;  Mr.  Godley,  Under-Secretary  for  India;  Lieu- 
tenant-General Strachey  ;  and  Mr.  Currie,  member  of  the  India 
Council. 

In  his  instructions  to  the  chairman,  Earl  Kimberley  especially 
emphasized  the  difficult  financial  condition  of  the  Indian  Govern- 
ment. The  bases  for  deliberation  were  to  be  communications 
from  the  latter  on  June  21,  1892,  and  also  the  correspondence 
carried  on  between  the  India  of^ce  and  the  viceroy's  Govern- 
ment,—  which  were  laid  before  the  commission.  The  delibera- 
tions were  to  be  secret ;  and  the  commission  could  lay  down  its 
own  rules  of  business.  The  Secretary  added  that  it  would  be  of 
especial  advantage  if  the  report  of  the  commission  could  be  pre- 
sented before  the  opening  of  the  Brussels  Conference,  which  is 
set  for  November  22,  1892. 

But  the  time  was  much  too  short  for  this  ;  such  an  exceed- 
ingly weighty  question  could  not  be  solved  in  a  month.  The 
commission  held  twelve  sittings,  the  first  on  October  27,  1892, 
the  last  on  February  22,  1893,  at  which  twenty-seven  experts 
were  heard.  Attention  was  also  given  to  a  large  number  of 
statements  which  were  laid  before  the  committee.  On  May  31, 
1893,  the  report  of  the  commission,  prepared  with  exceptional 
care,  was  laid  before  the  Secretary  of  State  for  India.  Although 
■•  the  opinions  of  the  experts  heard  were   much   divided,  the  com- 

mission unanimously  recommended  that  the  Indian  mint  should 
be  closed  to  private  persons  for  the  free  coinage  of  silver ;  that 
the  Government  should  reserve  to  itself  all  further  coinage  of 
silver  rupees  ;  and  that  the  Government  treasury  should  receive 
gold  in  payment  at  a  rate  of  is.  4d.  for  a  rupee,  thus  making  the 
sovereign  equal  to  1  5  rupees.  The  British  Government  accepted 
the  recommendation  of  the  Herschell  committee,  and  on  June 
26,  1893,  the  world  was  surprised  by  the  decree  that  the  Indian 
mints  were  closed  to  silver. 

The  stenographic  minutes  of  the  "Committee  appointed  to 
inquire  into  the  Indian  Currency,"  and  the  correspondence  car- 


94  INDIAN    SILVER    CURRENCY. 

ried  on  between  the  English  and  Indian  Governments,  making 
in  all  much  valuable  material,  was  published  and  laid  before  Par- 
liament in  a  Blue-Book. 

What  does  the  measure  of  June  26,  1893,  mean?  That  the 
silver  rupee,  dissevered  from  the  price  of  silver,  has  become  a 
credit-coin  ;  and  that  its  maximum  worth  is  fixed  at  is.  4d.  If  the 
value  of  the  rupee  rises  higher  than  is.  4d.,  it  will  be  advantageous 
to  pay  sovereigns  into  the  public  treasuries,  which  are  obliged  to 
receive  them.  If  there  is  a  downward  movement,  the  value  of 
the  rupee  is  not  fixed. 

It  is  the  aim  of  the  measure  to  make  the  rate  of  exchange 
between  England  and  India  independent  of  the  price  of  silver, 
and  thereby  make  it  steadier  ;  and  finally,  but  only  as  a  second- 
ary object,  to  prepare  the  way  for  the  limping  gold  standard. 

In  judging  the  measure  it  will  be  well  to  remember  that  the 
history  of  Holland's  currency  furnishes  us  an  example  of  a  mon- 
etary policy  similar  to  that  which  India  intends  to  follow.  We 
may  perhaps  be  allowed  to  digress  somewhat  more  than  the  mere 
consideration  of  Indian  affairs  properly  demands  ;  but  as  the  mon- 
etary history  of  Holland  is  so  exceptionally  important  and  rich 
in  instruction  it  is  to  be  hoped  that  this  digression  will  be 
pardoned. 

At  the  beginning  of  our  century'  the  condition  of  the  Dutch 
currency  was  very  unsatisfactory.  From  early  times  down  sil- 
ver was  the  chief  measure  of  value,  although  there  prevailed  a 
quite  unexampled  variety  among  the  silver  coins  in  circulation, 
due  to  the  fact  that,  during  the  existence  of  the  Republic  of  the 
United  Netherlands,  nearly  every  province  had  its  own  coins. 
Gold  coins  were  likewise  struck,  their  relative  values  being 
determined  by  the  Government.  But  silver  was  the  basis  of  the 
currency  until  1816.  In  that  year,  by  the  law  of  September  28, 
the  legal  double  standard  was  introduced  at  a  ratio  of  i  :  15.87 
between  the  current  silver  gulden  (weighing   200  aas,  and  9.61 

'  See  Van  den  Berg,  article,  "Exchange  between  Holland  and  Dutch  India''  in  Pal- 
grave's  Dictionary  of  Political  Economy,  vol  i.  p.  773,  ami  Report  of  the  Indian  Currency 
Committee,  §  88. 


HISTORY    OF    THE    INDIAN    SILVER    CURRENCY.  95 

grams  fine)  and  the  ten  gulden   pieces    (containing   6.056  grams 
fine  gold). 

Inasmuch  as  gold,  in  comparison  with  the  ratio  of  1:15^ 
adopted  by  France  in  1803,  was  overvalued,  all  the  silver  coins 
of  full  weight  were  driven  out  of  the  country,  and  gold  coins 
struck  according  to  the  law  of  18 16  and  all  depreciated  and 
clipped  silver  coins  of  an  earlier  date  formed  the  only  circulat- 
ing medium  of  the  country. 

To  improve  this  condition  of  things  a  law  was  passed  March 
22,  1839,  which  reduced  the  weight  of  fine  silver  in  the  gulden 
from  9.61  to  9.45  grams.  Hence  the  ratio  between  gold  and 
silver  became  i  :  15.60  instead  of  i  :  15.87.  But  since  the  gold, 
in  comparison  with  the  French  ratio,  was  still  overvalued,  the 
clipping  of  the  old  coins  continued  in  a  very  scandalous  fashion, 
so  that  a  premium  of  from  5  to  7. 50  per  centum  was  often  paid 
for  pieces  of  full  weight.  A  thorough-going  reform  of  the 
coinage  could  not  be  postponed  ;  and  a  general  recoinage  of  all 
silver  money  struck  before  1839  was  ordered  by  the  law  of  May 
22,  1845. 

In  a  few  years  the  old  silver  coins  were  withdrawn  from  cir- 
culation to  the  nominal  value  of  85  millions  gulden  and  recoined 
at  a  loss  of  about  8  millions  gulden.  At  the  same  time  the 
question  whether  the  double  standard  should  be  retained  was 
hotly  discussed  in  the  press ;  and,  after  long  debates  in  Parlia- 
ment, the  law  of  November  26,  1847,  was  passed'  which  intro- 
duced the  single  silver  standard  into  Holland  with  a  silver 
gulden,  containing  10.945  grams  fine  metal,  as  the  unit.  All  the 
gold  coins  in  the  hands  of  the  public  were  to  be  withdrawn  and 
demonetized. 

In  the  Dutch  East  Indies,  at  the  beginning  of  the  century, 
the  conditions  of  the  currency  were  if  possible,  even  worse  than 

'  Errors  have  crept  in  in  regard  to  this  date  with  different  authors.  Van  den 
Berg,  loc.  cit.,  p.  773,  and  Lexis  in  Handwörterbuch  der  Staatswissenschaften,  vol.  v. 
p.  665,  give  September  26,  1847.  Soetbeer,  in  Litteraturnachweis  über  Geld-  und 
Miinzwesen,  Berlin,  1892,  p.  55,  states  November  26,  1846,  as  the  day  of  the  passage 
of  the  lawr,  while  Nasse,  in  Schönberg's  Handbuch,  i.  p.  365,  and  Haupt,  Histoire 
Monetaire,  p.  227,  mentioned  December  26,  1847. 


go  INDIAN    SILVER    CURRENCY. 

those  in  the  mother  country,  and  the  Government  itself  helped 
to  ruin  the  monetary  system  of  the  colony. 

There  prevailed  an  erroneous  view  that  the  needs  of  the 
natives  were  too  little  developed  to  demand  the  use  of  the  pre- 
cious metals  as  a  medium  of  exchange.  "It  is  to  the  interest 
of  the  good  people  of  that  region  to  extend  the  circulation  of 
copper  money  as  far  as  possible."'  Since,  then,  the  Govern- 
ment effected  the  great  part  of  its  payments  in  copper-money  — 
the  so-called  duit — which  were  introduced  from  Holland  in  great 
quantities,  with  the  unavoidable  result  that  all  the  good  money 
coined  earlier  was  driven  out  of  the  country.  Silver  was  still 
the  legal  means  of  payment,  and  the  silver  gulden  was  the  unit 
of  account,  but  the  copper  coins  remained  throughout  the 
whole  land  the  only  medium  of  exchange.  A  general  deprecia- 
tion of  the  standard  was  the  natural  consequence  of  this  con- 
dition of  things ;  if  anyone  had  a  payment  to  make  in  Hol- 
land or  anywhere  else,  he  must  pay  a  premium  of  from  25  to 
30  per  centum. 

The  colony  suffered  severely  for  many  years  under  this  con- 
dition of  the  currency.  Finally  the  Government  decided  that  a 
drastic  measure  was  required  to  bring  the  currency  into  a  satis- 
factory condition.  By  the  act  of  May  i,  1854,  the  coinage 
system  of  the  mother  country,  as  established  by  the  law  of 
November  26,  1847,  was  introduced  into  the  Dutch  East 
Indies ;  and  since  then  influential  circles  have  left  nothing 
undone  in  order  that  the  colony  might  share  in  the  advantages 
of  a  well-ordered  monetary  system.  In  a  series  of  years  fol- 
lowing, large  shipments  of  silver  took  place  from  Holland  to 
Java  on  the  account  of  the  Government,  and  in  1854-60  alone 
they  amounted  to  90  millions  gulden.  Every  opportunity  was 
taken  to  put  silver  into  circulation  instead  of  the  copper 
money  ;  the  long-wished-for  reform  cost  the  state  20  millions 
gulden.' 

Holland  and  its  colonies,  therefore,  had  a  pure  silver  stand- 
ard.      In    consequence    of    other   states    going    over    to    gold, 

'Decree  of  the  Governor-General  of  the  Dutch  East  Indies,  June  25,   1818. 


IlISTOKY    OF    THE    INDIAN    SILVER    CURRENCY.  97 

HolL'uul,  in  1S73,'  susj^endcd  the  coinage  of  silver.  Silver  could 
not  henceforward  be  brought  to  the  mint ;  but  neither  was 
gold  coined,  because  Parliament  had  not  yet  decided  upon  a 
gold  coinage  or  the  gold  standard.  A  certain  amount  of  silver 
coins  were  at  that  time  in  circulation  ;  but  their  value  was  fixed 
neither  by  the  market  price  of  silver  nor  bv  that  of  gold. 
In  the  years  1873-75  ^^"'^  demand  for  coins  increased.  The 
result  was  that,  while  the  price  of  silver  as  a  metal  steadily  fell 
in  the  markets  of  the  world,  the  Dutch  silver  coins  became 
dearer  as  compared  with  gold.  The  London  rate  of  exchange 
which  today  oscillates  between  12.1  and  12.3  gulden  per  pound 
sterling,  sank  to  11. 12  gulden. 

In  1875,  a  limping  gold  standard  was  introduced  on  the  basis 
of  a  ratio  of  i  :  12^/^,  and  the  Dutch  mint  was  opened  to  gold, 
while  the  coinage  of  silver,  with  the  exce{)tion  of  fractional 
coins,  was  forbidden  ;  and  it  remains  so  today.  A  considerable 
quantity  of  gold  was  coined,  but  retained  as  a  reserve  in  the 
vaults  of  the  Central  Note  Bank,  and  did  not  enter  into  the 
home  circulation.  Silver  gulden,  at  their  nominal  value,  remain 
as  a  legal  tender  to  any  amount,  and  together  with  the  notes  of 
the  Netherlands  Bank  form  the  home  circulation.  Neither  sil- 
ver nor  paper  has  an  unconditional  claim  to  be  converted  into 
gold,  although  the  Netherlands  Bank  always  gives  gold  for  expor- 
tation. In  1 88 1  and  1882  the  balance  of  trade  was  unfavorable 
to  Holland,  and  the  supply  of  gold  in  the  Bank,  which  ordinarily 
amounted  to  80  millions  gulden  dropped  to  5  millions  gulden. 
Under  these  circumstances  a  law  was  passed  in  April  1884  which 
empowered  the  Government  to  allow  the  Bank  to  sell  25  millions 
of  silver  gulden  at  the  market  price  whenever  the  condition  of 
the  currency  demanded  it.  No  use  was  made  of  this  power, 
but  confidence  was  restored  by  the  measure.  They  are  able  to 
maintain  intact  the  necessary  gold  reserve  which  at  present 
amounts  to  ^5,000,000. 

In  Java  there  is  no  mint  and  very  little   gold.      The   amount 

'The  closing  of  the  Utrecht  mint  was  provisionally  passed  on  May  21,  1873, and 
definitively  only  by  the  law  of  December  3,  1873.     See  Haupt,  loc.  cit.,  p.  228. 


INDIAN    SILVER    CURRENCY. 


of  currency,  according   to    a   computation    in   the   report   of   the 
Herschell  committee  (§88)  is: 


Gold,   about. 

Silver 

Paper  


In  Holland 


5,200,000 
11,000,000 

16,000,000 


In   Java 


500,000 

2,773,000 
4,250,000 


The  experiences  which  Holland  has  had  with  its  currency 
since  1873  are  very  full  of  instruction  for  India.  It  establishes 
the  fact  that  with  a  wise  monetary  policy  it  is  quite  possible, 
with  a  favorable  balance  of  payments,  to  keep  the  quotations  of 
its  currency  in  the  markets  of  the  world  far  above  the  intrinsic 
value  of  the  majority  of  the  coins  constituting  that  currency.' 

But  now,  to  return  to  the  Dutch  East  Indies,  Java  alone  has 
all  the  great  advantage  of  possessing  the  same  monetary  system 
as  the  mother  country,  so  that  unfavorable  rates  of  exchange  can 
be  corrected  by  the  shipment  of  coin.  The  rates  of  exchange  are 
therefore  remarkably  steady,  as  the  following  table''  shows: 

RATES    FOR    BANK    BILLS    (siX  MONTHs)    FROM    BATAVIA    ON 
AMSTERDAM. 


1871  . 
1^75' 
1880. 
1885  . 
1886, 
1887  , 
18S8  , 
1889, 
1890  , 
1S91 


Maximum 

Minimum 

100 

IO3X 

99X 

IO2K 

99 14^ 

lOiX 

looYz 

102 

looX 

IOI34: 

looX 

IO2K 

lOI^ 

103 

I00>^ 

IO2K 

991^ 

102 

99^ 

101 

Average 


lOI^ 
100^ 
I00>^ 
lOiX 
101 

101  H 

1 02  A 

loiYz 

100% 
100^ 


As  to  the  effects  of  this  monetary  system  on  the  country,  all 

'  Compare  also  the  interesting  statements  collected  concerning  the  currency  of 
Canada.  West  India,  British  Guyana,  Brazil,  and  other  states  in  the  Report  of  the  Indian 
Currency  Committee. 

"Appendix  to  Afinutes  of  the  Indian  Currency  Committee,  p.  232. 


HISTORY    OF    TIIK    IXDIAX    SILVER    CURRENCY.  99 

are  not  of  the  same  opinion.  Van  den  Berg,  formerly  President 
of  the  Bank  of  Java,  and  now  President  of  the  Netherlands  Bank, 
said  in  1886  that  the  crisis  of  that  time  —  which  threatened  with 
annihilation  the  two  most  important  branches  of  industry  in  the 
country,  the  cultivation  of  coffee  and  cane  sugar  —  was  mainly 
due  to  the  introduction  of  the  limping  gold  standard.  In  res- 
pect to  the  mother  country,  he  did  not  at  all  recommend  a  return 
to  the  silver  standard  ;  but  yet  he  warned  every  Asiatic  govern- 
ment against  loosening  their  hold  on  the  use  of  silver  as  a  money 
metal,  and  urgently  advised,  rather,  a  courageous  assump- 
tion of  the  losses  arising  from  a  depreciating  standard.  Mean- 
while the  crisis  has  disappeared.'  Whether  the  gold  standard  was 
the  cause  of  it  is  more  than  doubtful.  On  the  other  hand,  the 
difficulty  is  explained  by  the  general  depression  then  existing, 
and,  as  regards  sugar,  by  the  competition  of  beet  sugar.  Sir 
David  Barbour,  in  his  special  statement  in  the  Final  Report 
of  the  Gold  and  Silver  Commission  (p.  147),  remarks:  "  Neth- 
erland  India,  where  the  gold  standard  was  adopted,  has  assuredly 
not  gained  by  the  change  in  comparison  with  the  other  Asiatic 
countries  which  maintained  the  silver  standard."  Furthermore, 
the  Chamber  of  Commerce  of  Sourabaya,  not  very  long  ago 
requested  the  Dutch  minister  for  the  colonies  to  investigate  the 
monetary  conditions^  of  Java,  where  the  chamber  asserted  that  the 
existing  currency  was  very  satisfactory.  The  minister  for  the  col- 
onies, Keuchenius,  then  said  in  the  first  chamber  of  the  States  Gen- 
eral, on  January  31,  1890,  that  he  very  much  doubted  whether  the 
monetary  system  prevailing  in  the  Dutch  P^ast  Indies  was  sound  ; 
it  had  the  appearance  to  him  of  resting  on  a  fiction,  and  on  this 
account  he  approved  of  the  investigation.  Keuchenius,  however, 
shortly  after  left  ofifice,  ostensibly  in  consequence  of  the  recep- 
tion accorded  the  above  declaration.  The  opponents  of  an 
Asiatic  gold  standard,  in  fact,  admit  that  the  exports  of  Java 
have  not  suffered  ;  but  they  believe  they  would  have  developed 
to  a  very  much  greater  extent,  especially  to  the  East  Asian  silver- 

'  Appendix  to  Minutes  of  the  Indian  Currency  Committee,  p.  232. 
'  Minutes  of  the  Indian  Currency  Committee,  Questions  1767  et  seq. 


100  INDIAN    SILVER    CURRENCY. 

using  countries,  if  they  had  not  been  retarded  by  the  conditions 
of  the  currency. 

But  others  point  to  the  fact  that  during  the  existence  of  the 
limping  gold  standard  the  welfare  of  Java  has  risen  exception- 
ally ;  that  elsewhere  the  farmer  is  seldom  found  in  so  fortunate 
a  condition  as  precisely  here.  This,  for  example,  is  the  opinion 
of  Mr.  Kensington,  a  high  ofificial  of  the  British-India  finance 
ministry  who,  in  a  report  of  September  21,  1892,  expressed^ 
himself  as  remarkably  well  pleased  with  what  he  saw  in  Java. 

To  return  to  India.  The  opinions  regarding  the  experiences 
of  Java,  therefore,  following  from  the  enactment  of  the  pure  sil- 
ver standard,  do  not  agree;  and  on  this  precedent  alone  India 
would  probably  not  be  induced  to  abandon  the  silver  standard. 
Yet  a  change  was  allowed  to  take  place  in  the  conditions  of  the 
currency  because  there  was  scarcely  any  other  feasible  way  than 
the  cessation  of  the  free  coinage  of  silver. 

To  be  sure,  many  other  recommendations  were  made,  but  all 
—  and  rightly — were  found  to  be  impracticable.  Among  the 
earliest  was  the  talk  about  the  adoption  of  a  high  seigniorage  of 
perhaps  10  per  centum,  or  of  a  duty  on  silver.  The  former  meas- 
ure would  have  led  to  the  same  disadvantages  which  are  now 
feared  from  the  cessation  of  silver  coinage.  The  financial  gain 
would  likewise  have  been  quite  unimportant ;  for  it  is  safe  to 
suppose  that  in  case  of  the  adoption  of  such  a  mint  charge  the 
coinage  would  have  very  materially  diminished.  Against  a  high 
import  duty  on  silver,  the  dif^cultics  of  collection  and  the  dan- 
ger of  smuggling  are  especially  to  be  urged.  It  is  also  very 
questionable  whether,  by  the  adoption  of  a  duty  on  silver,  they 
would  accomplish  the  purpose  of  raising  the  rate  of  the  rupee  and 
limiting  the  importation  of  silver,  since  it  is  not  to  be  overlooked 
that  the  price  of  silver  in  the  world's  markets  would  fall  exactly 
in  proportion  to  the  amount  of  the  duty,  if  the  Indian  purchaser 
would  not  submit  to  give  more.  If  they  should  establish  a 
sliding  mint  charge,  or  silver  duty,  it  would  open  the  door  to  the 
wildest  sj)eculation  ;  and  as  regards  the  collection  of  the  silver 

•  Appendix  to  Report  of  the  Indian  Currency  Committee,  p.  232. 


HISTORY    OF    THE    INDIAN    SILVER    CURRENCY.  101 

duty   the    difficulties    of    administration    would    be    inordinately 
increased. 

Yet  the  coinage  of  a  heavier  rupee  would  give  even  less  hel[) ; 
for  after  a  short  time  —  provided  that  the  price  of  silver  should 
fall  —  the  dif^culties  would  be  the  same  as  exist  today. 

Others  again  recommended  that  they  should  introduce  gold 
as  the  unit  of  account,  without  the  coinage  of  gold,  which  should 
be  based  on  a  reserve  to  be  kept  by  the  Bank  of  England  in 
India;  others  advised  the  use  of  a  certain  amount  of  gold  as  a 
standard  for  foreign  and  for  wholesale  transactions,  treating  the 
coins  for  domestic  trade  like  fractional  currency.  Further 
schemes  advocated  were :  the  declaration  of  the  rupee  as  a  legal 
tender  in  the  United  Kingdom  ;  the  introduction  of  the  gold 
standard  with  gold  in  circulation,  fixing  the  ratio  between  both 
metals  from  time  to  time  according  to  the  condition  of  the  mar- 
kets for  the  precious  metals  ;  the  issue  of  treasury  notes,  based 
on  gold,  but  simply  redeemable  in  rupees  at  the  daily  quotation 
then  existing;  the  striking  of  coins  made  of  a  composite  of 
gold  and  silver ;  the  adoption  both  of  a  silver  and  of  a  gold 
standard  which  should  exist  side  by  side  independent  of  each 
other;  the  coinage  of  gold  money,  but  only  of  large  denomina- 
tions (perhaps  from  5000  to  10,000  rupees),  as  the  legal  tender, 
degrading  the  rupee  to  the  level  of  token  money  —  and  to  base 
the  paper  money  on  gold  alone,  but  redeemable  in  gold  and 
silver. 

That  these  propositions  amounted  to  nothing,  is  evident  at 
first  glance.  For  their  venturesome  quality  some  of  them  are 
particularly  grotesque. 

It  is  yet  too  soon  to  decide  whether  the  Indian  Government 
has  acted  rightly  in  closing  its  mints  to  silver ;  a  knowledge 
of  the  effects  of  the  measure  is  needed  for  that.  As  I  possess 
no  gift  of  prophecy,  I  beg  that  the  following  statements  be 
treated  simply  as  my  personal  view,  obtained  by  an  unprejudiced 
examination  of  the  case,  and  which  does  not  lay  the  least  claim 
to  absolute  certainty. 

I  believe  a  distinction  should  be  made  between  Indian  and 


102  INDIAN    SILVER    CURRENCY. 

English  interests.  It  would  certainly  be  a  matter  of  indifference 
to  the  great  mass  of  the  Indian  people  what  the  standard  of  the 
country  was,  since  barter  yet  prevails  in  almost  all  the  level  part 
of  the  land.  Only  as  a  tax-payer  is  the  Indian  interested  that 
the  currency  should  be  as  good  as  possible,  and  thereby  the 
financial   condition  of  the  Government  be  as  strong  as  possible. 

But  on  the  other  side,  the  price  of  silver  in  the  world's  mar- 
kets must  fall  heavily  on  account  of  the  cessation  of  silver  coin- 
age, and  consequently  the  national  welfare  of  India  would  be 
seriously  threatened.  For  with  such  an  exceptionally  large 
supply  of  Indian  silver,  which  Mr.  Harrison'  estimates  at  Rx.  510 
millions,  or  54.55  millions  kilograms,  the  losses  would  amount 
to  hundreds  of  millions  of  marks.  On  this  it  is  to  be  noted  that 
a  great  part  of  the  silver  hoards  consist  of  coined  rupees,  and 
that  their  value  is  more  firmly  fixed  by  the  fact  that  the  native 
parts  with  his  ornaments  only  with  difficulty  ;  only  in  times  of 
great  distress,  such  as  the  frightful  famine  at  the  close  of  the 
seventies,  are  ornaments  brought  to  the  mints  (at  that  time  in 
three  years  45  millions  rupees).  This  is  true.  But  who  knows 
how  much  silver  was  melted  at  that  time  by  the  dealers  in 
precious  metals  before  they  were  brought  to  the  mints?  And 
is  it  not  a  misfortune  of  the  worst  kind  if  a  native  forsakes  his 
last  anchor  of  salvation,  his  ornaments,  in  the  moment  of  his 
greatest  need?  From  time  immemorial  have  the  largest  classes 
of  the  population  invested  their  total  savings  in  silver ;  so  that 
a  sudden  fall  in  its  value  is  not  to  be  treated  without  consideration, 
as  from  the  English  point  of  view  it  is  likely  to  be. 

It  is  urged  further  that,  in  case  the  difference  between  the 
value  of  the  coined  rupee  and  its  silver  contents  should  become 
too  great,  counterfeit  coins  of  full  weight  would  be  coined. 
That  would  certainly  be  very  undesirable ;  and  the  counterfeit 
pieces  would  very  easily  enter  into  circulation,  since,  as  the 
Report  of  the  Hcrschell  Committee  itself  admits,  the  native  is 
influenced  much  more  by  the  weight  of  metal  in  the  coin  than 
by   its   external   appearance.      To   this   it   is  answered    that   very 

'Appendix  to  Minutes  of  the  Indian  Currency  Commillce,  p.  307. 


HISTORY    OF    THE    INDIAN    SILVER    CURRENCY.  IO3 

bulky  and  costly  machinery  is  rc(|uircd  for  counterfeiting  —  in 
case  it  should  be  ]M-üfitablc  —  and  such  it  woultl  be  difficult  to 
obtain.  Against  this  it  is  to  be  said  that  the  Indians  are  famous 
as  exceptionally  clever  workers  in  metals,  and  how  could  a 
European  police  prevent  unauthorized  coins  from  being  made  in 
a  country'  of  nearly  300  millions  of  inhabitants  !  It  is  my  opinion 
that  this  danger  is  over-estimated  ;  the  experience  of  Germany 
with  its  thalers,  and  of  the  Latin  Union  with  its  five-franc  pieces, 
permit  this  conclusion. 

The  currency  reform  is  probably  of  most  danger  to  the  Indian 
industries  which  export  to  East  Asia.  Although  the  exports  of 
India  to  China,  Japan,  etc.,  are  only  one-half  as  large  as  those  to 
the  gold-using  countries,  there  are  no  corresponding  imports 
such  as  come  from  Europe,  and  the  Indian  balance  of  trade  is 
kept  so  strongly  favorable  only  by  the  trade  with  East  Asia. 
Now  India  has  a  different  currency  from  the  countries  which 
form  its  mainstay.  What  will  be  the  effect?  That  the  export 
of  opium  to  China  should  seriously  decline  does  not  appear  very 
likely,  for  the  Indian  opium  is  there  a  luxury  for  which  something 
more  can  be  exacted.  But  how  as  to  the  cotton  industry? 
They  have  now  the  disadvantage  as  compared  with  Lancashire 
that  they  do  not  in  the  least  possess  any  such  organized 
money  market  as  the  English  manufacturers  have  at  hand  in  the 
London  markets,  and  which  is  absolutely  necessary  to  enable 
them  to  compete.  It  will  probably  now  become  very  much 
easier  for  the  infant  cotton  industry  of  China  and  especially  of 
Japan  to  again  drive  the  Bombay  peo{)le  from  the  home  market. 

That  the  exports  of  India  to  gold-using  countries  would  be 
injured  by  the  closing  of  the  mints,  I  do  not  believe;  ic  is  the 
contrary.  To  all  appearances  the  rate  of  exchange  will  now 
remain  very  much  steadier  than  formerly,  when  it  was  entirely 
independent  of  the  condition  of  the  silver  market ;  and  that  is 
an  invaluable  gain  to  trade.  The  view  that  the  deprecia- 
tion of  silver  served  as  a  premium  on  exports  in  Indian  trade 
has  now  very  little  value  ;  for  we  said,  in  Chapter  II.,  that  at  least 
for  the  exports  of  Indian  grain  a  favorable  effect  of  the  currency 


104  INDIAN    SILVER    CURRENCY. 

was  not  proved,  and  that  India's  exports,  as  well  as  its  ability  to 
compete  in  the  world's  markets,  depend  far  more  on  other  things 
than  on  the  condition  of  the  exchanges. 

In  this  question  the  English  should  be  distinguished  from 
the  Indian  interests;  they  do  not  always  coincide.  But  even 
England's  interest  depends  not  so  much  on  a  rise  as  on  the  sta- 
bility of  the  rates  of  exchange,  although  a  rise  would  be  of  great 
advantage  to  the  United  Kingdom. 

There  are  also  the  firms  engaged  in  exportation  to  East  India. 
To  them  it  is  certainly  not  important  to  keep  the  rates  of 
exchange  steady,  but  if  possible  to  raise  the  value  of  the  rupee. 

That  the  interests  of  the  European  officials  in  India  espe- 
cially demand  a  change  of  the  standard,  probably  no  one  would 
claim  ;  a  measure  such  as  Ceylon  adopted,  by  fixing  the  salaries 
of  its  officers  at  is.  lo^d.,  would  have  served  the  same  pur- 
pose. This,  however,  would  have  the  same  effect  as  the  adop- 
tion of  an  obligation  to  pay  in  gold,  because  it  would  have  bur- 
dened the  Indian  tax-payer  to  the  same  extent.  But  something 
must  be  done,  if  the  integrity  of  the  bureaucracy  and  therewith 
the  position  of  England  in  India  is  to  be  preserved. 

Finally  this  plays  a  chief  role  :  it  is  the  interest  of  England 
to  keep  the  Indian  Government  in  a  strong  financial  condition  so 
that  it  may  be  able  to  aid  in  the  defense  of  the  British  Empire, 
as  it  has  done  to  the  present  time.  Since  English  rule  in  India 
undoubtedly  means  a  great  gain  to  civilization,  and  its  mainte- 
nance is  also  highly  desirable  in  the  interests  of  the  Indian  peo- 
ple, the  interests  of  India  and  those  of  England  here  may  partly 
coincide. 

Whether  the  measure  adoi)tcd  was  the  right  one,  it  is  too 
soon,  as  before  observed,  to  decide.  But  after  the  closing  of 
the  mints  the  currency  policy  of  the  Government  does  not  appear 
to  have  been  free  from  error.  I  do  not  think  it  was  proper,  dur- 
ing the  period  of  the  crisis  naturally  following  such  a  thorough- 
going measure,  for  the  Indian  Government  to  try  to  continue  the 
sale  of  council  bills  at  a  time  when  the  country's  balance  of  trade 
—  only  temporarily,  one  would  hope  —  became  unfavorable.      In 


HISTORY    OF    THE    INDIAN    SILVER    CURRENCY.  IO5 

the  end  such  exceptionally  skillful  business  men  as  the  English 
may  here  succeed  in  finding  the  right  way,  since  it  is  a  matter  of 
vital  importance  to  their  power  in  the  world. 

They  will  surely  succeed  also  in  preventing  the  Indian  cur- 
rency from  becoming  dangerous  to  the  gold  standards  of  Europe. 
For  should  the  Indian  Government  sometime  succeed  in  keeping  a 
permanently  stable  rate  of  exchange,  in  order  to  prepare  for  the 
coming  of  the  limping  gold  standard,  —  the  mother  country  would 
look  strictly  to  see  that  no  scarcity  of  gold  should  result  —  which 
would  be  of  most  serious  import  to  her.  In  the  main  I  believe 
that  the  effect  on  the  gold  supplies  of  the  world  of  finally  intro- 
ducing the  limping  gold  standard  into  India  is  overestimated. 
Gold  can  always  be  used  as  money  in  India  only  to  a  limited 
extent ;  it  is  even  claimed  that  the  present  silver  coins  are  of  too 
great  value  for  the  great  mass  of  the  Indian  transactions,  and 
that  therefore  copper  coins  are  mostly  in  daily  use.'  How  then 
would  it  be  with  gold  coins? 

The  English  have  no  sentiment  in  colonial  policies.  They 
will  be  first  of  all  careful  that  the  currency  policy  shall  not 
injure  them,  nor  Europe. 

'Compare  Dr.  G.  Ruhland, "Zwei  bimetallistiche  Theorien,"  in  the  Frankfurter 
Zeiiuttg,  Morgenblatt  No.  36,  February  5,  1894. 


APPENDIX  I. 

MINUTE    BY    THE    HONORABLE    SIR    DAVID    BARBOUR,'    K.   C.    S.   I. 

1.  In  dealing  with  the  currency  of  British  India  it  is  necessary  to 
draw  a  distinction  between  the  active  rupee  circulation  and  the  total 
number  of  rupees  in  existence.  A  large  proportion  of  the  rupees 
issued  from  the  mints  and  not  melted  down  are  kept  as  permanent 
hoards  and  fulfill  none  of  the  functions  of  money.  This  distinction 
cannot,  however,  be  sharply  drawn,  as  rupees  are  always  liable  to  pass 
from  hoards  into  the  active  circulation,  and  vice  versa.  What  I  call 
the  active  rupee  circulation  may  be  held  to  include  all  the  rupees 
which  at  some  period  of  each  year  are  used  as  money. 

The  total  active  rupee  circulation  has  recently  been  estimated  at 
Rx.  115,000,000. 

Without  accepting  these  figures  as  more  than  an  approximation  to  the 
truth,  they  are  sufificient  to  show  that  a  gold  standard  with  a  purely 
gold  currency  is  impossible  in  India.  To  establish  a  gold  currency  in 
India  with  a  full  legal  tender  currency  composed  entirely  of  gold,  it 
would  be  necessary  to  withdraw  from  circulation  about  1,150  millions 
of  rupees,  to  melt  them  down,  and  sell  them  for  what  they  would 
fetch  as  silver  bullion,  and  then  to  replace  them  by  about  ;;^77,ooo,ooo 
worth  of  gold. 

In  the  present  conditions  of  India  and  of  the  silver  and  gold 
markets  this  would  be  an  impossible  operation. 

Moreover,  a  gold  standard  with  a  purely  gold  currency  of  full 
legal  tender  coins  would  not  suit  India  (even  if  it  were  possible  to 
introduce  it),  because  the  gold  coins  would  in  practice  be  of  too  great 
value  to  suit  the  vast  majority  of  Indian  transactions. 

2.  It  follows  from  what  has  been  stated  in  the  preceding  paragraph 
that  if  we  are  to  have  a  gold  standard  in  India,  a  large  proportion  of  the 
circulation  must  consist  of  silver  coins,  and  these  coins  must  be  a  legal 
tender  to  any  amount.  The  example  of  France  and  other  countries 
shows  that  it  is  possible  to  have  a  gold  standard,  although  a  large  per- 

'  Appendix  I.,  Minutes  of  the  Indian  Currency  Committee,  p.  I47. 
107 


I08  INDIAN    SILVER    CURRENCY. 

centage  of  the  circulation  consists  of  overvalued  silver  coins  which  are 
legal  tender  to  any  amount. 

In  order  that  the  gold  standard  may  be  effective,  a  limit  must,  how- 
ever, be  placed  to  the  number  of  such  coins,  and  they  must  be  con- 
vertible into  gold  coins,  either  without  payment  of  premium  or  on  pay- 
ment of  a  trifling  premium,  whenever  any  person  wishes  for  gold  coins 
in  exchange  for  silver  coins. 

So  long  as  the  silver  coins  are  freely  exchangeable  for  gold  coins 
in  accordance  with  their  face  values,  the  gold  standard  is  effectively 
maintained. 

3.  I  have  no  doubt  that  even  with  a  gold  standard  the  people  of 
India  would  in  almost  all  their  transactions  prefer  to  employ  silver 
rupees.  It  is  improbable  that  a  gold  coin  of  less  than  Rs.  10  in  value 
would  be  issued  in  India,  and  such  a  coin  would  be  quite  unsuited  for 
ordinary  Indian  transactions.  Rs.  10  represents,  generally,  much  more 
than  a  cooly's  wages  for  a  month,  and  if  a  cooly  received  his  wages 
in  the  form  of  a  single  coin  he  would  immediately  exchange  it  for 
smaller  coins.  We  could  not  pay  our  soldiers  or  police  in  gold  coins. 
Payments  to  the  opium  cultivators  could  not  be  made  in  gold  ;  neither 
could  the  ryots  pay  their  rents  in  gold. 

There  would  also  be  a  not  unreasonable  dread  among  the  common 
people  that  gold  coins  might  be  of  light  weight ;  they  would  generally 
be  unwilling  to  accept  them,  and  for  monetary  purposes  in  ordinary 
life  gold  coins  would  hardly  be  used.  This  would  be  the  case,  I 
believe,  even  if  gold  coins  of  the  value  of  only  Rs.  5  each  were 
issued. 

4.  It  may,  then,  be  taken  for  granted  that  with  a  gold  standard  the 
great  bulk  of  the  Indian  currency  must  continue  to  be  silver  rupees, 
and  that  for  monetary  purposes  there  would  ordinarily  be  no  consid- 
erable demand  for  gold  coins  in  exchange  for  silver.  On  the  contrary 
the  demand  for  monetary  purposes  would  rather  be  for  silver  coins  in 
exchange  for  gold  coins.  Gold  coins  would  only,  as  a  rule,  be  required 
in  exchange  for  silver  coins,  when  gold  was  required  for  hoarding,  for 
export,  or  to  be  melted  down  for  ornaments. 

It  follows  that  with  a  gold  standard  India  would  require,  and  would 
use,  a  very  large  amount  of  silver  rupees,  and  would  neither  require 
nor  use  a  large  number  of  gold  coins. 

Any  gold  coins  that  were  put  into  circulation,  and  were  not  melted 
down  or  hoarded,  would  very  quickly  find  their  way  into  the  hands  of 


APPENDIX. 


109 


bankers  and  dealers   in  bullion,   into  the  government  treasuries  and 
into  the  Paper  Currency  Reserve. 

5.  For  the  purpose  of  introducing  a  gold  standard  into  India,  we 
might  stop  the  free  coinage  of  silver,  adopt  measures  for  accumulating 
a  store  of  gold,  and,  when  what  was  considered  a  sufficient  stock  of 
gold  had  been  obtained,  we  might  open  the  mints  to  the  free  coinage 
of  gold,  make  gold  coins  a  legal  tender  and  guarantee  by  means  of 
our  accumulated  stock  of  gold  the  exchangeability  of  silver  for  gold 
coins  according  to  their  face  values.  I  do  not  recommend  this  plan  ; 
the  accumulation  of  a  sufficient  store  of  gold  would  be  a  measure  too 
expensive  for  a  country  situated  as  India  is,  and  when  it  had  been 
accumulated  and  the  exchangeability  of  the  silver  coins  for  gold  coins 
had  been  guaranteed  by  means  of  it,  there  would  be  a  very  great  risk  of 
the  whole  stock  of  gold  being  drawn  away  in  exchange  for  silver  rupees. 
If  this  should  happen,  and  I  think  it  would  happen  unless  our  stock 
of  gold  was  very  large  indeed,  the  gold  standard  would  cease  to  exist, 
and  we  should  find  ourselves  exactly  where  we  started. 

6.  The  only  measures  for  the  introduction  of  a  gold  standard  into 
India  which  seem  to  me  feasible  are  the  following  : 

(i)  The  first  measure  would  be  the  stoppage  of  the  free  coinage  of 
silver.  Government  would  retain  the  right  of  purchasing 
silver  and  coining  it  into  rupees. 

(2)  The  next  measure  would  be  to  open  the  mints  to  the  free  coin- 
age of  gold.  Any  man  bringing  gold  to  the  mints  would  be 
entitled  to  have  it  coined  into  gold  coins,  which  would  be  legal 
tender  to  any  amount.  It  would  be  desirable  to  stop  the  free 
coinage  of  silver  some  time  before  opening  the  mints  to  the 
free  coinage  of  gold.  It  would  be  a  valuable  guide  to  us  in 
subsequent  proceedings  to  know  exactly  what  effect  the  stop- 
page of  the  free  coinage  of  silver  had  on  the  gold  value  of  the 
rupee. 

The  new  gold  coins  might  be  a  lo-rupee  piece  and  a  20-rupee  piece. 

7.  The  weight  and  fineness  of  the  gold  coins  to  be  issued  from  the 
mint  would  be  such  that  the  par  of  exchange  between  them  and  the 
sovereign  would  be  the  exchange  which  it  was  desired  to  establish 
between  India  and  England. 

For  example,  if  we  wished  the  rupee  to  be  worth  is.  4d.  the  lo-rupee 
coin  would  contain  as  much  gold  as  was  worth  (is.  4d.)  X  10=160 
pence. 


no  INDIAN    SILVER    CURRENCY. 

The  quantity  of  fine  gold  in  the  lo-rupee  piece  would  be  ^|^,  or 
two-thirds  of  the  quantity  contained  in  the  sovereign. 

8.  The  question  of  the  ratio  at  which  we  should  change  from  the 
silver  to  the  gold  standard  would  require  careful  consideration. 

We  ought  not  to  think  of  going  back  to  the  old  ratio  of  1:15^. 
Neither  ought  we  to  adopt  the  very  lowest  price  to  which  silver  may 
have  fallen  at  any  time,  or  to  consider  ourselves  bound  to  accept  the 
market  ratio  of  the  very  moment  at  which  the  change  was  made.  A 
ratio  based  on  the  average  price  of  silver  during  a  limited  period  before 
the  introduction  of  the  gold  standard  would  probably  be  both  the 
safest  and  the  most  equitable. 

9.  We  may  be  quite  sure  that,  on  the  introduction  of  the  gold 
standard,  bankers  and  bullion  dealers  away  from  the  Presidency  towns 
and,  perhaps,  in  the  Presidency  towns,  would  charge  something  for 
changing  silver  coins  for  gold  ones.  The  general  public,  however, 
would  very  seldom  require  to  make  such  exchanges,  and,  if  all  Govern- 
ment Treasuries  were  required  to  give  gold  coins  for  silver  coins  when- 
ever it  was  possible  for  them  to  do  so,  there  could  not  be  any  consid- 
erable premium  on  gold  coins  so  long  as  there  were  such  coins  in  the 
public  Treasuries  or  in  the  Paper  Currency  Reserve,  and  the  gold  stand- 
ard would,  subject  to  the  above  condition,  be  effectively  maintained. 

10.  After  the  above  measures  had  been  carried  out,  it  might  happen 
that  no  gold  was  brought  to  the  Mints  to  be  coined  and  put  into  circu- 
lation, and  that  the  rupee  fell  in  value  below  is.  4d. 

Or,  it  might  happen  that  though  gold  was  brought  to  the  mints  for 
a  time  and  the  rupee  was  worth  is.  4d.,  yet  subsequently  gold  ceased 
to  be  brought  to  the  Mints,  the  gold  coins  disappeared  from  circula- 
tion, and  the  rupee  fell  below  is.  4d. 

If  gold  were  not  brought  to  the  Mint  to  be  coined  and  put  into 
circulation,  or  if  gold  coins  disappeared  and  gold  ceased  to  be  brought 
to  the  Mints,  it  would  be  a  sign  that  the  rupee  currency  was  redundant, 
or,  in  other  words,  that  there  were  too  many  silver  rupees  in  circula- 
tion, that  consequently  their  value  had  fallen  below  is.  4d.  each,  that 
gold  coins  had  been  driven  out  of  circulation,  and  that  the  gold  stand- 
ard was  no  longer  effectively  maintained. 

The  remedy  in  such  case  would  be  to  contract  the  rupee  cur- 
rency, and  to  adopt  any  feasible  measures  for  improving  the  general 
financial  position  of  the  country.  An  improvement  in  the  general  finan- 
cial position  would  give  increased  confidence,  and  the  reduction  of  the 


APPENDIX.  I  I  I 

rupee  currency,  if  carried  far  enouL(h,  must  ultimately  restore  the  value 
of  that  coin. 

11.  The  greatest  danger  from  the  cause  just  indicated  would  arise 
immediately  after  the  first  introduction  of  the  gold  standard,  and  would 
be  brought  about  by  silver  rupees  being  returned  into  India  from  for- 
eign countries,  and  by  their  being  thrown  into  active  circulation  from 
Indian  hoards.  I  think  that  Indian  rupees  would  certainly  be  returned 
to  India  from  abroad  when  their  value  in  India  became  greater  than 
their  bullion  value,  but  I  now  doubt  very  much  if  Indian  rupees 
would  be  largely  brought  out  of  hoards.  It  is  more  likely  that  exist- 
ing hoards  of  rupees  would  practically  remain  unaffected.  I  formerly 
held  a  different  opinion  on  this  point,  and  believed  that  rupees  would 
be  largely  brought  out  of  hoards  when  they  were  given  a  value  exceed- 
ing that  of  the  metal  contained  in  them. 

12.  The  reduction  of  the  rupee  currency  in  the  manner  just  indi- 
cated, if  it  became  necessary,  might  or  might  not  prove  a  very  expen- 
sive measure.  It  could,  of  course,  be  spread  over  a  number  of  years, 
but  until  it  had  been  carried  out  to  a  sufficient  extent  the  gold  standard 
would  not  be  effectively  maintained.  When  the  rupee  currency  had 
once  been  sufficiently  reduced  I  should  not  expect  any  serious  difficulty 
in  the  future. 

Looking  to  the  increase  of  population  in  India,  to  the  rapid  open- 
ing out  of  the  country,  and  to  the  comparatively  small  part  which 
credit  plays  in  Indian  trade,  it  may  fairly  be  held  that  even  with  a  gold 
standard  an  increase  of  the  rupee  currency  would  be  required  every 
year,  and  that  increase  I  place  at  not  less  than  Rx.  1,000,000  yearly. 
It  might  be  considerably  more,  twice  or  three  times  as  much.  When 
the  coinage  of  rupees  was  stopped,  any  redundancy  of  the  silver  cur- 
rency would  be  diminished  yearly  by  this  amount  without  any  action 
on  our  part.  It  is  also  not  impossible  that  rupees  would  continue  to  be 
withdrawn  from  the  active  circulation  to  be  hoarded  as  at  present; 
they  would  certainly  be  hoarded  by  persons  whose  savings  were  small. 
This  cause  would  still  further  reduce  any  temporary  redundancy  of  the 
silver  currency  at  first  starting.  Of  course  while  the  reduction  of  the 
rupee  currency  was  in  progress  we  would  not  have  an  effective  gold 
standard,  but  even  during  that  period  of  uncertainty  I  should  expect 
the  exchange  with  England  to  remain  much  steadier  than  it  has  been 
during  the  last  few  years.  It  would  cease  to  be  blown  up  and  down 
by  every  breath  of  speculation,  and,  if  we  could  establish  confidence  in 


112  INDIAN    SILVER    CURRENCY. 

our  measures,  the  rate  of  exchange  would  tend  strongly  towards  the  rate 
we  had  decided  to  maintain,  and  would  only  diverge  from  it  under  the 
pressure  of  real  economic  forces. 

A  nation  that  possessed  a  fairly  satisfactory  standard  of  value  might 
well  hesitate  to  expose  itself  even  temporarily  to  the  evils  of  an  incon- 
vertible standard,  but  no  such  argument  applies  in  the  case  of  India. 
We  already  labor  under  difficulties  which  are  quite  as  great  as  those  to 
which  an  inconvertible  paper  standard  would  expose  us.  The  prospect 
of  being  unable  for  a  time  to  effectively  establish  the  gold  standard 
need  not,  therefore,  deter  us  from  the  attempt  to  do  so  if  we  see  a 
prospect  of  success  in  the  future. 

13.  It  is  also  possible  that  under  certain  conditions  of  trade  there 
might  be  more  gold  brought  to  the  Mint  and  put  into  circulation  than 
was  required  for  ordinary  use  as  currency. 

In  that  case  the  public  would  get  rid  of  the  gold  coins  by  paying 
them  into  the  Government  Treasuries.  Gold  might  accumulate  in  these 
Treasuries,  and  the  Government  could  not  in  practice  relieve  the  Treas- 
uries by  forcing  gold  coins  on  persons  who  preferred  to  receive  pay- 
ment in  silver. 

The  proper  remedy  for  any  such  accumulation  of  gold  would  be 
for  the  Treasuries  to  pass  the  gold  coins  into  the  Paper  Currency 
Reserve,  which  could  absorb  several  millions  without  difficulty,  and  the 
Paper  Currency  Reserve  could  be  relieved,  when  necessary,  by  remit- 
ting the  gold  to  England  in  payment  of  debts,  its  place  being  taken 
by  silver  rupees. 

No  serious  difficulty  arising  from  an  over-supply  of  gold  coins  need, 
therefore,  be  feared. 

14.  It  is  important  to  consider  what  the  additional  demand  for 
gold  would  be,  owing  to  the  establishment  of  a  gold  standard  in 
India. 

Taking  the  active  circulation  at  Rx.  115,000,000,  I  think  that  gold 
coins  to  the  value  of  one-fifth  of  that  amount  would  be  an  ample  pro- 
portion of  the  active  circulation  for  the  purpose  of  maintaining  the 
gold  standard.  This  would  be  Rx.  23,000,000  worth  of  gold,  or,  say, 
1 5,000,0000  pounds  sterling.  I  believe  that  the  gold  standard  would  be 
maintained  effectively  with  a  smaller  amount  of  gold,  and  that  gold  in 
excess  of  ;^i  5,000,000  in  theactivecirculation  would  be  unnecessary  and 
might  be  a  source  of  positive  inconvenience.  When  we  had  arrived  at 
normal  conditions  the  yearly  additions  of  gold  required  for  the  active 


APPENDIX.  113 

currency  would   be  small,    and  would  probably    not  exceed  ;^20o,ooo 
yearly. 

15.  It  is  more  than  probable,  however,  that  the  substitution  of  a  ^^old 
standard  for  a  silver  standard  would  lead  to  the  increased  use  of  gold 
instead  of  silver  for  hoarding.  On  the  question  of  the  extent  to  which 
this  substitution  of  gold  for  silver  would  ultimately  be  carried,  I  am 
unable  to  offer  any  opinion. 

Silver  is  at  present  used  for  hoarding  (as  a  store  of  value),  and  for 
ornament.  When  it  ceased  to  be  the  monetary  standard  of  India  it 
would  be  less  suitable  for  hoarding,  but  it  might  continue  to  be  largely 
hoarded  in  the  form  of  rupees,  and,  on  the  other  hand,  silver  bullion 
would  fall  considerably  in  value  and  price,  and  its  greater  cheapness 
would  tend  to  increase  its  use  for  purposes  of  ornament.  It  must  be 
uncertain  to  what  extent  gold  would  begin  to  take  the  place  of  silver 
for  hoarding  and  ornaments  after  the  establishment  of  a  gold  standard, 
but  in  the  first  instance,  at  any  rate,  the  extent  of  the  change  would 
probably  not  be  considerable. 

It  is  held  by  some  that,  if  a  gold  standard  were  established  in  India, 
a  great  deal  of  the  gold  that  is  now  hoarded  or  held  in  the  form  of  orna- 
ments would  be  brought  to  the  Mints,  coined,  and  put  into  circulation. 
I  have  never  been  able  to  accept  this  theory.  Why  should  a  native  of 
India  give  up  his  habit  of  hoarding,  or  an  Indian  lady  cease  to  take  a 
pleasure  in  the  wearing  or  possession  of  gold  ornaments,  merely 
because  the  Government  of  India  had  established  a  gold  standard  ? 

There  is,  however,  a  large  amount  of  gold  imported  into  this  country 
every  year,  and  there  must  always  be  a  considerable  amount  of  gold  in 
the  hands  of  bullion  dealers.  I  think  that  if  we  had  an  effective 
gold  standard  it  is  very  likely  that  all  this  gold,  which  is,  as  it  were 
waiting  till  the  time  of  absorption  arrives,  would  be  coined  and  become 
part  of  the  circulation  for  the  time.  To  facilitate  this  result,  I  would 
propose  not  to  charge  any  seigniorage  on  gold  coins. 

16.  In  this  paper  I  have  dealt  with  the  question  of  a  gold  standard 
for  India  from  a  practical  point  of  view.  Many  objections,  founded 
on  considerations  not  of  an  immediately  practical  nature,  may  be  raised 
to  the  introduction  of  a  gold  standard  into  India.  Some  of  these 
objections  appear  to  me  to  possess  weight ;  others  I  believe  to  be  imag- 
inary. I  have  no  hesitation  in  saying  that  an  international  agreement 
for  the  free  coinage  of  both  silver  and  gold,  and  for  the  making  of 
them  full  legal  tender  at  a  fixed  ratio,  would  be  far  better  for  India 


114  INDIAN    SILVER    CURRENCY. 

and  all  other  countries  than  the  establishment  of  the  single  gold  stand- 
ard, even  if  the  latter  course  be  possible. 

Under  the  former  system  the  worst  result  that  could  happen  would 
be  the  disappearance  of  one  of  the  metals  from  circulation,  but  this 
would  only  happen  by  the  other  metal  taking  its  place  and  gradually 
driving  it  out,  and  under  such  circumstances  all  countries  would  have 
the  same  standard. 

The  general  adoption  of  the  system  of  double  legal  tender  would 
be  a  perfectly  safe  measure,  and  would  be  a  final  settlement  of  the 
question.  The  attempt  to  establish  a  general  gold  standard  is  not  free 
from  risk.  History  affords  instances  of  the  establishment  of  a  gold 
standard  in  one  or  more  countries,  but  sooner  or  later  the  standard 
was  changed.  It  may,  however,  be  that  the  conditions  of  gold  mining 
have  so  greatly  changed  that  a  gold  standard  can  now  be  maintained 
for  an  indefinite  period. 

17.  With  regard  to  the  question  of  the  expediency  of  attempting 
to  introduce  a  gold  standard  into  India,  I  do  not  go  further  than  say- 
ing that,  if  a  general  agreement  for  the  free  coinage  of  both  silver  and 
gold  at  a  ratio  cannot  be  obtained,  and  if  the  United  States  does  not 
adopt  free  coinage  of  silver,  I  think  an  attempt  should  be  made  to 
establish  a  gold  standard  in  this  country. 

I  believe  that  a  perpetuation  of  the  difference  of  monetary  standards 
between  England  and  her  Indian  Empire  would  be  a  source  of  incal- 
culable mischief  to  both  England  and  India,  and  that  such  a  state  of 
things  should  not  be  accepted  until  it  has  been  proved  by  actual 
experiment  to  be  absolutely  unavoidable. 

June  21,  1892. 


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EXCHANGE.' 


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Wheat 


Exchange 


'  The  figures  in  the  scale  represent  millions  of  cwts.  for  wheat ;  and,  in  the  scale 
for  the  exchanges,  the  figures  give  the  number  of  pence  to  the  rupee. 


..   UNiVERsrry'oF  California  library, 

BERKELEY 

THIS  BOOK  IS  DUE  ON  THE  LAST  DATE 

STAMPED  BELOW 

Books  not  returned  on  time  are  subject  to  a  fine  of 

.  .-      50c  per  volume  after  the  third  day  overdue,   increasing 

to  $1.00  per  volume  after  the  sixth  day.      Books  not  in 

demand  may  be  renewed   if   application   is  made  before 

expiration  of  loan  period. 

.M 

J-«  7  925 

:H^VV.^^ 

^^^'57^  Wf 

REC  D  LD 

AUG  21  19b'/ 

NOV    41983 

ric.  cit  -L   f>  •» 

207nl,'2l2 

^^A^ 


YD  05650 


